Buyback Derangement Syndrome

13 Pages Posted: 8 Dec 2017 Last revised: 28 Feb 2018

Clifford S. Asness

AQR Capital Management, LLC

Todd M. Hazelkorn

AQR Capital Management, LLC

Scott A. Richardson

AQR Capital Management, LLC; London Business School

Date Written: November 1, 2017

Abstract

The popular press is replete with commentary seeking to damn the behavior of corporate managers in handing free cash flow back into the hands of shareholders. These criticisms are often, even regularly, without merit (at least merit that can be demonstrated), sometimes glaringly so. Aggregate share repurchase activity has not been at historical highs when measured properly, and when netted against debt issuance is almost a non-event, does not mechanically create earnings (EPS) growth, does not stifle aggregate investment activity, and has not been the primary cause for recent stock market strength. These myths should be discarded.

Keywords: Share Repurchases, Buybacks

JEL Classification: G35, G00, G10, G14, G30, G32

Suggested Citation

Asness, Clifford S. and Hazelkorn, Todd M. and Richardson, Scott A., Buyback Derangement Syndrome (November 1, 2017). Journalof Portfolio Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3082460 or http://dx.doi.org/10.2139/ssrn.3082460

Cliff S. Asness

AQR Capital Management, LLC ( email )

Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
United States
203-742-3601 (Phone)
203-742-3101 (Fax)

HOME PAGE: http://www.aqrcapital.com

Todd Hazelkorn (Contact Author)

AQR Capital Management, LLC ( email )

Greenwich, CT
United States
203 742 3914 (Phone)

HOME PAGE: http://www.aqr.com

Scott Anthony Richardson

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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