RT Journal Article
SR Electronic
T1 Buyback Derangement Syndrome
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 50
OP 57
DO 10.3905/jpm.2018.44.5.050
VO 44
IS 5
A1 Clifford Asness
A1 Todd Hazelkorn
A1 Scott Richardson
YR 2018
UL https://pm-research.com/content/44/5/50.abstract
AB 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.TOPIC: Security analysis and valuation