Characteristic Timing / Robin Greenwood, Samuel Hanson.

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Greenwood, Robin

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w15948.Publication details: Cambridge, Mass. National Bureau of Economic Research 2010.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We use differences between the attributes of stock issuers and repurchasers to forecast characteristic-related stock returns. For example, we show that large firms underperform following years when issuing firms are large relative to repurchasing firms. Our approach is useful for forecasting returns to portfolios based on book-to-market (HML), size (SMB), price, distress, payout policy, profitability, and industry. We consider interpretations of these results based on both time-varying risk premia and mispricing. Our results are primarily consistent with the view that firms issue and repurchase shares to exploit time-varying characteristic mispricing.

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Previous	nber w15945 Short Criminals: Stature and Crime in Early America /	nber w15946 The Political Economy of Intergenerational Income Mobility /	nber w15947 Local Labor Markets /	nber w15948 Characteristic Timing /	nber w15949 The Economics of International Differences in Educational Achievement /	nber w1595 High School Graduation, Performance and Earnings /	nber w15950 Does Risk Explain Anomalies? Evidence from Expected Return Estimates /	Next

April 2010.

We use differences between the attributes of stock issuers and repurchasers to forecast characteristic-related stock returns. For example, we show that large firms underperform following years when issuing firms are large relative to repurchasing firms. Our approach is useful for forecasting returns to portfolios based on book-to-market (HML), size (SMB), price, distress, payout policy, profitability, and industry. We consider interpretations of these results based on both time-varying risk premia and mispricing. Our results are primarily consistent with the view that firms issue and repurchase shares to exploit time-varying characteristic mispricing.