Book-to-Market Decomposition, Net Share Issuance, and the Cross Section of Global Stock Returns
29 Pages Posted: 1 Jun 2017 Last revised: 8 Jun 2019
Date Written: May 22, 2019
This paper provides global evidence supporting the hypothesis that expected return models are enhanced by the inclusion of variables that describe the evolution of book-to-market—changes in book value, changes in price, and net share issues. This conclusion is supported using data representing North America, Europe, Japan, and Asia. Results are highly consistent across all global regions and hold for small and big market capitalization subsets as well as in diﬀerent subperiods. Variables measured over the past twelve months are more relevant than variables measured over the past thirty-six months, demonstrating that recent news is more important than old news.
Keywords: Global return predictability, Cross-section of returns, Book-to-market, Net share issues
JEL Classification: F20, F21, F30, G10, G11, G12, G15
Suggested Citation: Suggested Citation