Share Issuance Effects in the Cross-Section of Stock Returns

28 Pages Posted: 10 Jun 2012  

David P. Lancaster

Reserve Bank of Australia

Graham N. Bornholt

Griffith University - Department of Accounting, Finance and Economics

Date Written: June 10, 2012

Abstract

Previous research describes the net share issuance anomaly in U.S. stocks as pervasive, both in size-based sorts and in cross-section regressions. As a further test of its pervasiveness, this paper undertakes an in-depth study of share issuance effects in the Australian equity market. The anomaly is observed in all size stocks except micro stocks. For example, equal weighted portfolios of non-issuing big stocks outperform portfolios of high issuing big stocks by an average of 0.84% per month over 1990–2009. This outperformance survives risk adjustment and appears to subsume the asset growth effect in Australian stock returns.

Keywords: share issuance, asset pricing, cross-sectional return, asset growth, mispricing

JEL Classification: G10, G11, G12, G14

Suggested Citation

Lancaster, David P. and Bornholt, Graham N., Share Issuance Effects in the Cross-Section of Stock Returns (June 10, 2012). Available at SSRN: https://ssrn.com/abstract=2080759 or http://dx.doi.org/10.2139/ssrn.2080759

David Paul Lancaster (Contact Author)

Reserve Bank of Australia ( email )

65, Martin Place
Sydney, NSW 2000
Australia

Graham N. Bornholt

Griffith University - Department of Accounting, Finance and Economics ( email )

Gold Coast Campus
Gold Coast QLD, 4222
Australia

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