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Can the information content of share repurchases improve the accuracy of equity premium predictions?

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EMPFIN_S_13_00075_4_.pdf (384.8Kb)
Date
03/2014
Author
Andriosopoulos, Dimitris
Chronopoulos, Dimitris
Papadimitriou, Fotios I.
Keywords
Stock return predictability
Dividend-price ratio
Share repurchases
Out-of-sample tests
Economic value
HG Finance
BDC
R2C
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Abstract
We adjust the dividend–price ratio for share repurchases and investigate whether predictive power can be improved when constructing forecasts of the 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.
Citation
Andriosopoulos , D , Chronopoulos , D & Papadimitriou , F I 2014 , ' Can the information content of share repurchases improve the accuracy of equity premium predictions? ' , Journal of Empirical Finance , vol. 26 , pp. 96-111 . https://doi.org/10.1016/j.jempfin.2014.01.006
Publication
Journal of Empirical Finance
Status
Peer reviewed
DOI
https://doi.org/10.1016/j.jempfin.2014.01.006
ISSN
0927-5398
Type
Journal article
Collections
  • University of St Andrews Research
URI
http://hdl.handle.net/10023/7076

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