Net Buybacks and the Seven Dwarfs

Jean-François L’Her, Tarek Masmoudi and Ram Karthik Krishnamoorthy

Financial Analysts Journal, 2018, vol. 74, issue 4, 57-85

Abstract: During the last two decades, the relationship between economic growth and equity returns has been weak across global stock markets. Economic growth has not been a good proxy for dividend-per-share growth. In the majority of the stock markets, issuance has exceeded buybacks and has resulted in a dilution effect. In several markets, however, buybacks have exceeded issuance, resulting in an accretion effect. The main finding of our study is that, whether investors use a dividend model or a total payout model to decompose equity returns, net buybacks explain more than 80% of the cross-sectional dispersion of stock market returns.A practitioner's perspective on this article is provided in the In Practice piece "Economic Growth = High Returns? Don't Bet on It" by Phil Davis.Disclosure: The views expressed in this article are those of the authors in their personal capacity and do not necessarily reflect the views of the Abu Dhabi Investment Authority (ADIA). Although the authors have taken care to ensure that the information herein is accurate at the time of publication, neither the authors nor ADIA make any representation or warranty with respect to the accuracy of this article.Editor’s NoteThis article was externally reviewed using our double-blind peer-review process. When the article was accepted for publication, the authors thanked the reviewers in their acknowledgments. Roger Ibbotson was one of the reviewers for this article. Submitted 11 September 2017 Accepted 21 June 2018 by Stephen J. Brown

Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.2469/faj.v74.n4.4 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:ufajxx:v:74:y:2018:i:4:p:57-85

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/ufaj20

DOI: 10.2469/faj.v74.n4.4

Access Statistics for this article

Financial Analysts Journal is currently edited by Maryann Dupes

More articles in Financial Analysts Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().