Share Issuance Effects in the Cross-Section of Stock Returns

Abstract

Previous research describes the net share issuance anomaly in U.S. stocks as pervasive, both in size-based sorts and in cross-section regressions. As a further test of its pervasiveness, this paper undertakes an in-depth study of share issuance effects in the Australian equity market. The anomaly is observed in all size stocks except micro stocks. For example, equal weighted portfolios of non-issuing big stocks outperform portfolios of high issuing big stocks by an average of 0.84% per month over 1990–2009. This outperformance survives risk adjustment and appears to subsume the asset growth effect in Australian stock returns.