share issuance anomaly
What it checks
Companies that have dramatically increased their share count over 5 years tend to underperform (they issued shares when overvalued). Companies that have shrunk their share count via buybacks tend to outperform. Trade the top/bottom deciles of 5y share-count growth.
Mechanism
Firms with high trailing-5-year share-issuance growth significantly underperform low-issuance (buyback-heavy) firms. Combines (i) management timing equity issuance when overvalued and (ii) the external-financing anomaly (Bradshaw-Richardson-Sloan 2006).
Signal rule
5y share-count growth in top decile of own history fires SHORT for 126/252d; bottom decile fires LONG.
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
key_metricsWorker data table, see services/worker schema.
Expected edge
- Paper alpha
- +/-5-8% over 12mo
- Paper window
- T+1 to T+252d
Pontiff-Woodgate 2008; ~5-8% gross over 12mo on top/bottom decile spread.
Related families
asset growth anomalyQualityFirms with the highest YoY total-asset growth subsequently underperform low-growth peers by ~8% ann. (Cooper-Gulen-Schill 2008 RFS). Captures managerial overconfidence, empire-building, and overpayment for acquisitions that the market under-discounts at the time of expansion and corrects over 1-3 years. Anchors the FF5 CMA factor leg. Replicated internationally (Watanabe-Xu-Yao-Yu 2013 ROF; Titman-Wei-Xie 2013).
buyback driftQualityCompanies announcing open-market share repurchases earn ~3-4% abnormal return over the subsequent 12 months. Effect is strongest in "value-distressed" announcers (book-to-market in the top quartile, recent price drawdown). We approximate buyback announcements by detecting net share count contractions in quarterly fundamentals β ΞSharesOutstanding < 0 over 2 consecutive quarters is a strong proxy for an active buyback programme.
shareholder yieldValueCombined dividend + buyback yield (cash returned to shareholders / market cap).
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