Can the information content of share repurchases improve the accuracy of equity premium predictions?
Can the information content of share repurchases improve the accuracy of equity premium predictions?
We adjust the dividend-price ratio for share repurchases and investigate whether predictive power can be improved when constructing forecasts of UK and French equity premia. Regulations in the two largest European stock markets allow us to employ actual repurchase data in our predictive regressions. Hence, we are able to overcome problems associated with markets characterised by less stringent disclosure requirements, where investors might have to rely on proxies for measuring repurchase activity. We find that predictability does not improve either in a statistical or in an economically significant sense once actual share repurchases are considered. Furthermore, we employ a proxy measure of repurchases which can be easily constructed in international markets and demonstrate that its predictive content is not in line with that of the actual repurchase data.
stock return predictability, dividend-price ratio, share repurchases, out-of-sample tests, economic value
96-111
Andriosopoulos, Dimitris
dc63106b-3330-4b9b-87b2-474df2c83b0e
Chronopoulos, Dimitris K.
5537b805-450f-4ef4-b3e3-116e5b50db3e
Papadimitriou, Fotios I.
e90e7f7a-0d8d-4fbb-9b08-729d2dd2e217
3 March 2014
Andriosopoulos, Dimitris
dc63106b-3330-4b9b-87b2-474df2c83b0e
Chronopoulos, Dimitris K.
5537b805-450f-4ef4-b3e3-116e5b50db3e
Papadimitriou, Fotios I.
e90e7f7a-0d8d-4fbb-9b08-729d2dd2e217
Andriosopoulos, Dimitris, Chronopoulos, Dimitris K. and Papadimitriou, Fotios I.
(2014)
Can the information content of share repurchases improve the accuracy of equity premium predictions?
Journal of Empirical Finance, 26, .
(doi:10.1016/j.jempfin.2014.01.006).
Abstract
We adjust the dividend-price ratio for share repurchases and investigate whether predictive power can be improved when constructing forecasts of UK and French equity premia. Regulations in the two largest European stock markets allow us to employ actual repurchase data in our predictive regressions. Hence, we are able to overcome problems associated with markets characterised by less stringent disclosure requirements, where investors might have to rely on proxies for measuring repurchase activity. We find that predictability does not improve either in a statistical or in an economically significant sense once actual share repurchases are considered. Furthermore, we employ a proxy measure of repurchases which can be easily constructed in international markets and demonstrate that its predictive content is not in line with that of the actual repurchase data.
Text
Can the information content of share repurchases improve the accuracy of equity premium predictions.pdf
- Accepted Manuscript
More information
Accepted/In Press date: 31 January 2014
e-pub ahead of print date: 6 February 2014
Published date: 3 March 2014
Keywords:
stock return predictability, dividend-price ratio, share repurchases, out-of-sample tests, economic value
Organisations:
Centre for Digital, Interactive & Data Driven Marketing
Identifiers
Local EPrints ID: 362027
URI: http://eprints.soton.ac.uk/id/eprint/362027
ISSN: 0927-5398
PURE UUID: 30c622b6-c307-4b5d-895f-3f74382a8d3f
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Date deposited: 11 Feb 2014 12:05
Last modified: 14 Mar 2024 15:59
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Contributors
Author:
Dimitris Andriosopoulos
Author:
Dimitris K. Chronopoulos
Author:
Fotios I. Papadimitriou
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