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Share Issuance and Cross-sectional Returns




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      Pontiff is at Boston College's Carroll School of Management. Woodgate is at the University of Washington and Russell Investment Group. We thank an anonymous referee, Malcolm Baker, Larry Dann, Ozgur Demirtas, Espen Eckbo, Cliff Holderness, David Ikenberry, Robert Kieschnick, Wayne Mikkelson, Jon Reuter, Andy Siegel, Cliff Stephens, Jeff Wurgler, Patrick Zimmerman, and workshop participants at Baruch University, Boston University, the University of Georgia, the University of Oregon, the University of Texas—Dallas, the University of Washington, as well as the Boston College brown bag workshop for useful comments. We thank Ken French for providing both data and detailed comments. Artemiza Woodgate would like to gratefully acknowledge financial support from the School of Business and Administration at the University of Washington, as well as the Albert O. Foster Endowment for their fellowships.


Post-1970, share issuance exhibits a strong cross-sectional ability to predict stock returns. This predictive ability is more statistically significant than the individual predictive ability of size, book-to-market, or momentum. Our finding is related to research that finds that long-run returns are associated with share repurchase announcements, seasoned equity offerings, and stock mergers, although our results remain strong even after exclusion of the data used in these studies. We estimate the issuance relation pre-1970 and find no statistically significant predictive ability for most holding periods.