Shares Outstanding and Cross-Sectional Returns
38 Pages Posted: 24 Mar 2005
Date Written: May 26, 2005
Post-1970, the change in shares outstanding exhibits a strong cross-sectional ability to predict stock returns. This predictive ability is more statistically significant than the individual predictive ability of size, book-to-market, or momentum. Our finding is related to research that finds that long-run returns are associated with share repurchase announcements, seasoned equity offerings, and stock mergers, although our results remain strong even after exclusion of the data used in these studies. We also provide estimation of the share change relation pre-1970 and find no statistically significant predictive ability for most holding periods.
Keywords: Market efficiency, return predictability, capital structure
JEL Classification: G14, G32, G12
Suggested Citation: Suggested Citation