Decompose Composite Equity Issuance Anomaly

4 Pages Posted: 23 Sep 2019 Last revised: 31 Oct 2019

See all articles by Daniel Fang

Daniel Fang

Northern Trust Asset Management

Diana Olteanu-Veerman

affiliation not provided to SSRN

Date Written: September 18, 2019


Composite equity issuance (CEI) anomaly was one of well-known stock anomalies. Kent Daniel and Sheridan Titman in their 2006 paper, “Market Reaction to Tangible and Intangible Information”, broke down stock return into tangible and intangible return and argued that intangible return can explain both return reversal effect and book to price effect. In their paper, composite equity issuance was used as a measure of intangible return. Despite wide citations of CEI anomaly by various publications, we found little understanding on fundamental drivers behind this anomaly. In this paper, we decompose this anomaly through a simple transformation and show that efficacy of CEI anomaly rests on two most powerful stock factors: share change and dividend yield.

Keywords: Composite Equity Issuance, CEI, Anomaly, Share Change, Dividend Yield, Stock Return, Prediction, Intangible Return

JEL Classification: G14, G12

Suggested Citation

Fang, Daniel and Olteanu-Veerman, Diana, Decompose Composite Equity Issuance Anomaly (September 18, 2019). Available at SSRN: or

Daniel Fang (Contact Author)

Northern Trust Asset Management ( email )

50 South LaSalle Street
Chicago, IL 60603
United States

Diana Olteanu-Veerman

affiliation not provided to SSRN

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