Composite equity issuance and the cross-section of country and industry returns
Source of Publication
Behavioural finance literature argues that stock issuance contains information on equity valuation. If so, does it predict the cross-section of both country and industry stock returns? To answer this question, we investigate data from 68 markets from 1976 to 2022. We find that composite equity issuance negatively correlates with future aggregate stock returns. An equal-weighted quintile of countries (industries) with the highest issuance underperforms those with the lowest by 0.34% (0.58%) per month. Established risk factors and other anomalies cannot subsume this cross-sectional pattern. Furthermore, the effect remains robust to many considerations. This documented issuance anomaly paves the way for an exploitable international investment strategy.
Informa UK Limited
Composite equity issuance, International markets, Equity anomalies, The cross-section of stock returns, Return predictability
Long, Huaigang; Chiah, Mardy; Zaremba, Adam; and Umar, Zaghum, "Composite equity issuance and the cross-section of country and industry returns" (2023). All Works. 5570.
Indexed in Scopus