Characteristic Timing

56 Pages Posted: 26 Dec 2008 Last revised: 15 Feb 2010

See all articles by Robin M. Greenwood

Robin M. Greenwood

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

Samuel Gregory Hanson

Harvard University - Business School (HBS)

Multiple version iconThere are 3 versions of this paper

Date Written: February 10, 2010


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.

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

JEL Classification: G14, G32

Suggested Citation

Greenwood, Robin M. and Hanson, Samuel Gregory, Characteristic Timing (February 10, 2010). Harvard Business School Finance Working Paper No. 09-099, Available at SSRN: or

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 University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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