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Exploiting the persistence in managerial market timing

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  • Goto, Shingo
  • Kalesnik, Vitali

Abstract

Some firms time their share issuances/repurchases using their private information while others do not. We identify successful timers by comparing a cash-flow-based measure of net share issuance (NSI) with a share-based measure. Recent successful timers—only a small fraction (23%)—drive the known return predictability of NSI in the following year. The evidence suggests that the stock market underreacts to the persistence of managerial market-timing, providing significant opportunities for investors to mimic successful market-timing in their investment strategies. A value-weighted NSI hedge portfolio formed only on recent successful timers earns a six-factor alpha of 11.8% a year after transaction costs.

Suggested Citation

  • Goto, Shingo & Kalesnik, Vitali, 2022. "Exploiting the persistence in managerial market timing," Finance Research Letters, Elsevier, vol. 46(PB).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321003792
    DOI: 10.1016/j.frl.2021.102377
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    Cited by:

    1. Clarke, Nicholas, 2022. "It's just a matter of time: Abnormal returns after firms stop repurchasing shares," Finance Research Letters, Elsevier, vol. 49(C).

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    More about this item

    Keywords

    G10; G14;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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