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Changes in shares outstanding and country stock returns around the world

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  • Long, Huaigang
  • Chiah, Mardy
  • Zaremba, Adam
  • Umar, Zaghum

Abstract

Motivated by stock-level evidence of the issuance anomalies, we examine whether a similar effect drives the cross-section of country stock returns. To this end, we investigate six decades of data from 67 markets. The changes in aggregate shares outstanding negatively predict future country equity returns. The quintile of markets with the highest share increase underperforms their low-issuance counterparts by 0.85 % per month. The effect is distinctly robust and cannot be subsumed by known risk factors. The observed pattern complies with the mispricing interpretation, and high arbitrage constraints augment its magnitude. Finally, the issuance premium may be harvested with exchange-traded funds, paving the way for a viable country selection strategy.

Suggested Citation

  • Long, Huaigang & Chiah, Mardy & Zaremba, Adam & Umar, Zaghum, 2024. "Changes in shares outstanding and country stock returns around the world," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:intfin:v:90:y:2024:i:c:s1042443123001518
    DOI: 10.1016/j.intfin.2023.101883
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    More about this item

    Keywords

    Shares outstanding; Equity issuance; International stock markets; Equity anomalies; Country equity returns; The cross-section of stock returns; Return predictability; Asset pricing;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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