Characteristics, Covariances, and Average Returns: 1929-1997

Davis, J. L.; Fama, Eugene F.; French, Kenneth R.

doi:10.2139/ssrn.98678

Cited by 373 publications

(353 citation statements)

References 24 publications

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“…The finding that these tests reject the joint hypothesis that all of the intercepts are zero is potentially important. While it is not the first rejection of the Fama‐French model (see Davis, Fama, and French (2000) and Cremers (2003), among others), it does suggest that portfolio returns sorted in some way on payout yield cannot be explained cross‐sectionally solely by the Fama‐French factors.…”

Section: Resultsmentioning

confidence: 93%

On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing

Boudoukh¹,

Michaely²,

Richardson³

et al. 2007

The Journal of Finance

567

213

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We investigate the empirical implications of using various measures of payout yield rather than dividend yield for asset pricing models. We find statistically and economically significant predictability in the time series when payout (dividends plus repurchases) and net payout (dividends plus repurchases minus issuances) yields are used instead of the dividend yield. Similarly, we find that payout (net payout) yields contains information about the cross section of expected stock returns exceeding that of dividend yields, and that the high minus low payout yield portfolio is a priced factor.WHILE THE IRRELEVANCE THEOREM of Miller and Modigliani (1961) implies that there is no reason to suspect that dividends play a role in determining equity price levels or equity returns, the theorem is silent on the usefulness of dividends in explaining these variables. It is then, perhaps, not surprising that there is a considerable literature exploiting the properties of dividends and dividend yields to better understand the fundamentals of asset pricing both in the time series and in the cross section. Motivation for the former comes from variations of the Gordon growth model in which dividend yields can be written as the return minus the dividend's growth rate (see, e.g., Fama and French (1988)), from consumption-based asset pricing models in which the firm's dividends covary with aggregate consumption (e.g., Lucas (1978) and Shiller (1981)), and so forth. Additional motivation comes from cross-sectional heterogeneity in tax, agency, and asymmetric information considerations (e

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Section: Resultsmentioning

confidence: 93%

On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing

Boudoukh¹,

Michaely²,

Richardson³

et al. 2007

The Journal of Finance

567

213

View full text Add to dashboard Cite

show abstract

“…This indicates that the returns of IPO firms initially mimic the poor performance of small, low book‐to‐market firms, but perform worse over longer time horizons (see Figure 3). The matched size and book‐to‐market portfolios in our sample are relatively free from IPO firms because Davis et al (2000) only allocate NYSE firms to the benchmark portfolios. It was very rare for firms that had recently gone public to list on the NYSE during these years, and our results in Table III showed that few CRSP‐listed firms during this time period were actually IPOs.…”

Section: Resultsmentioning

confidence: 99%

“…We classify the IPOs into quintiles based on their market capitalization and book‐to‐market ratio. We utilize the quintile breakpoints created by Davis, Fama, and French (2000) 12 . To get size breakpoints, firms are grouped on the basis of market capitalization at the beginning of a particular trading month.…”

Section: Datamentioning

confidence: 99%

The Really Long‐Run Performance of Initial Public Offerings: The Pre‐Nasdaq Evidence

Gompers¹,

Lerner²

2003

The Journal of Finance

274

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Financial economists have intensely debated the performance of IPOs using data after the formation of Nasdaq. This paper sheds light on this controversy by undertaking a large, out-of-sample study: We examine the performance for ¢ve years after listing of 3,661 U.S. IPOs from 1935 to 1972.The sample displays some underperformance when event-time buy-and-hold abnormal returns are used.The underperformance disappears, however, when cumulative abnormal returns are utilized. A calendar-time analysis shows that over the entire period, IPOs return as much as the market. The intercepts in CAPM and FamaF rench regressions are insigni¢cantly di¡erent from zero, suggesting no abnormal performance. RITTER (1991) AND LOUGHRAN AND RITTER (1995) document severe underperformance of initial public o¡erings (IPOs) during the past 20 years. In discussing these results, they suggest that investors may systematically be too optimistic about the prospects of ¢rms that are issuing equity for the ¢rst time.Their results have inspired countless articles in the popular press about the danger of investing in IPOs, as well as academic research that has shown that underperformance extends to other countries as well as to seasoned equity o¡erings.The results concerning IPO performance, however, are controversial. Brav and Gompers (1997) show that ¢rms that go public do not perform worse than benchmarks matched on the basis of size and book-to-market ratios. In addition, they show that value weighting IPO returns dramatically reduces the measured underperformance. Finally, they argue that weighting returns in event time by the number of IPOs may overstate underperformance. Schultz (2003) argues that if more ¢rms go public after stock prices have risen, event-time analyses may indicate that IPOs underperform, even if the ex ante expected return of these o¡erings is zero.

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“…Both size and book-to-market satisfy this criterion. Further, empirical work by Banz (1981), Stattman (1980), andFama andFrench (1992), (1993) among others finds that average return depends on both these variables even after controlling for market Beta.…”

mentioning

confidence: 99%

“…These portfolios are formed from the six value-weighted portfolios SL, SM, SH, BL, BM, and BH from Fama and French (1993) and Davis, Fama and French (1999).…”

mentioning

confidence: 99%

Portfolio Choice and Equity Characteristics: Characterizing the Hedging Demands Induced by Return Predictability

Lynch

1999

SSRN Journal

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Characteristics, Covariances, and Average Returns: 1929-1997

Cited by 373 publications

References 24 publications

On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing

On the Importance of Measuring Payout Yield: Implications for Empirical Asset Pricing

The Really Long‐Run Performance of Initial Public Offerings: The Pre‐Nasdaq Evidence

Portfolio Choice and Equity Characteristics: Characterizing the Hedging Demands Induced by Return Predictability

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