Buyback derangement syndrome

Asness, C, Hazelkorn, T and Richardson, S A (2018) Buyback derangement syndrome. Journal of Portfolio Management, 44 (5). pp. 50-57. ISSN 0095-4918


Over the last few years, a lot of press, pundit, and political attention has been paid to share repurchases, much of it critical. Most repurchase critics assert that share repurchases are at historical highs and that dollars spent repurchasing shares would otherwise be directed toward profitable investment. Some also credit recent stock market gains to the “sugar high” of share repurchases. The authors show that most of these criticisms are without merit (at least, merit that can be demonstrated), sometimes glaringly so. Aggregate share repurchase activity has not been at historical highs when measured properly, and when netted against debt issuance it is almost a non-event: It does not mechanically create earnings growth, does not stifle aggregate investment activity, and has not been the primary cause for recent stock market strength. These myths should be discarded.

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Item Type: Article
Subject Areas: Accounting
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© 2018 Pageant Media Ltd

Date Deposited: 16 May 2018 13:22
Subjects: Investment appraisal
Share yields
Last Modified: 23 Feb 2024 02:36

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