Composite equity issuance and the cross-section of country and industry returns

Title: Composite equity issuance and the cross-section of country and industry returns
Creator: Long, Huaigang; Chiah, Mardy; Zaremba, Adam; Umar, Zaghum
Relation: Applied Economics Vol. 55, Issue 56, p. 6627-6645
Publisher Link: http://dx.doi.org/10.1080/00036846.2022.2161992
Publisher: Routledge
Resource Type: journal article
Date: 2023
Description: 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.
Subject: composite equity issuance; international markets; equity anomalies; the cross-section of stock returns; return predictability
Identifier: http://hdl.handle.net/1959.13/1493281
Identifier: uon:53528
Identifier: ISSN:0003-6846
Language: eng
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