Characteristic Timing

57 Pages Posted: 3 May 2010 Last revised: 29 Jan 2025

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: April 2010

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.

Suggested Citation

Greenwood, Robin M. and Hanson, Samuel Gregory, Characteristic Timing (April 2010). NBER Working Paper No. w15948, Available at SSRN: https://ssrn.com/abstract=1598064

Robin M. Greenwood (Contact Author)

Harvard Business School - Finance Unit ( email )

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National Bureau of Economic Research (NBER)

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Samuel Gregory Hanson

Harvard University - Business School (HBS) ( email )

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Boston, MA 02163
United States

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