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Share Issuance and Factor Timing

Robin M. Greenwood

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Samuel Gregory Hanson

Harvard Business School

December 2, 2010

We show that characteristics of stock issuers can be used to forecast important common factors in stocks returns such as those associated with book-to-market, size, and industry. Specifically, we use differences between the attributes of stock issuers and repurchasers to forecast characteristic-related factor returns. For example, we show that large firms underperform following years when issuing firms are large relative to repurchasing firms. While our strongest results are for portfolios based on book-to-market, size (i.e., we forecast the HML and SMB factors), and industry, our approach is also useful for forecasting factor returns associated with distress, payout policy, and profitability.

Number of Pages in PDF File: 52

Keywords: Limits-to-arbitrage, characteristics, mispricing, capital structure, cross-section of stock returns

JEL Classification: G14, G32

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Date posted: March 17, 2010 ; Last revised: December 5, 2010

Suggested Citation

Greenwood, Robin M. and Hanson, Samuel Gregory, Share Issuance and Factor Timing (December 2, 2010). Available at SSRN: http://ssrn.com/abstract=1572174 or http://dx.doi.org/10.2139/ssrn.1572174

Contact Information

Robin M. Greenwood (Contact Author)
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-495-6979 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Samuel Gregory Hanson
Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
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References:  59
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