NSt

Brian Sowinski (BM), Damon Goin (NSt), Jon Montgomery (SS) 36; t8.

Record Article Feed Staff Reports 2010

And dBt-k, t is the difference between the continuously compounded growth in total book equity over the preceding one, three, or five fiscal years and the matching NSt-k, t computed from fiscal year end to fiscal year end.

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Table 5 allows us to examine how average returns vary with NSt-k, t after adjusting for market cap and book-to-market effects.

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On the other hand, if net issues help isolate information about expected cashflows that improves estimates of expected returns, the higher frequency and more complete spectrum of net issues in later years may enhance the role of NSt-k, t.

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NSt-k, t is the difference between the continuously compounded growth in total market equity, computed using the price and shares outstanding reported by CRSP, and the continuously compounded capital gain (dMt-k, t) over the same period.

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Finally, NSt-k, t is the change from t-k to t in the log of shares outstanding, but the breakpoints in Table 4 are simple percent changes.

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The average regression slopes for NSt-k, t are negative, which is in line with earlier evidence that long-term returns are strong after stock repurchases and weak after stock issues.

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For example, the decline in 1963-2006 ABT abnormal returns across the sort cells from extreme repurchases to extreme issues is meaningful (and consistent with the negative average regression slopes for NSt-k, t in Table 2), but the fact that the average residuals for less extreme issues are mostly positive is probably misleading.

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Another variable that can enhance estimates of expected returns because it is related to expected cashflows is net share issues, NSt-k, t.

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In any case, like the sorts for ABT stocks, the 1927-1963 NSt-k, t sorts for Tiny stocks fail to produce the negative relation between average returns and net share issues observed in the subsequent period.

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