Can the Information Content of Share Repurchases Improve the Accuracy of Equity Premium Predictions?

34 Pages Posted: 14 Mar 2012 Last revised: 1 Aug 2018

See all articles by Dimitris Andriosopoulos

Dimitris Andriosopoulos

Strathclyde Business School

Dimitris K. Chronopoulos

University of St. Andrews - School of Management

Fotios I. Papadimitriou

Business School, University of Aberdeen

Date Written: March 19, 2013

Abstract

We adjust the dividend-price ratio for share repurchases and investigate whether predictive power can be improved when constructing forecasts of UK and French equity premia. Regulations in the two largest European stock markets allow us to employ actual repurchase data in our predictive regressions. Hence, we are able to overcome problems associated with markets characterised by less stringent disclosure requirements, where investors might have to rely on proxies for measuring repurchase activity. We find that predictability does not improve either in a statistical or in an economically significant sense once actual share repurchases are considered. Furthermore, we employ a proxy measure of repurchases which can be easily constructed in international markets and demonstrate that its predictive content is not in line with that of the actual repurchase data.

Keywords: Stock Return Predictability, Equity premium, Dividend-price ratio, Share Repurchases, Out-of-sample tests

JEL Classification: C22, C53, G12, G17

Suggested Citation

Andriosopoulos, Dimitris and Chronopoulos, Dimitris K. and Papadimitriou, Fotios I., Can the Information Content of Share Repurchases Improve the Accuracy of Equity Premium Predictions? (March 19, 2013). A revised version appears in the Journal of Empirical Finance, Vol. 26, 2014. Available at SSRN: https://ssrn.com/abstract=2021068 or http://dx.doi.org/10.2139/ssrn.2021068

Dimitris Andriosopoulos

Strathclyde Business School ( email )

199 Cathedral Street
Department of Accounting and Finance
Glasgow, G4 0QU
United Kingdom
+44(0)1415483892 (Phone)

HOME PAGE: http://www.strath.ac.uk/staff/andriosopoulosdimitrisdr/

Dimitris K. Chronopoulos

University of St. Andrews - School of Management ( email )

The Gateway
North Haugh
St. Andrews, Fife, Scotland KY16 9SS
United Kingdom

Fotios I. Papadimitriou (Contact Author)

Business School, University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

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