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Characteristic Timing

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  • Robin Greenwood
  • Samuel Hanson
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    Abstract

    We use differences between the attributes of stock issuers and repurchasers to forecast characteristic-related stock returns. For example, we show that large firms underperform following years when issuing firms are large relative to repurchasing firms. Our approach is useful for forecasting returns to portfolios based on book-to-market (HML), size (SMB), price, distress, payout policy, profitability, and industry. We consider interpretations of these results based on both time-varying risk premia and mispricing. Our results are primarily consistent with the view that firms issue and repurchase shares to exploit time-varying characteristic mispricing.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15948.

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    Date of creation: Apr 2010
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    Publication status: published as Greenwood, Robin, and Samuel G. Hanson. "Share Issuance and Factor Timing." Journal of Finance 67, no. 2 (April 2012): 761–798.
    Handle: RePEc:nbr:nberwo:15948

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