RT Journal Article
SR Electronic
T1 Portfolios Weighted by Repurchase and Total Payout
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 77
OP 83
DO 10.3905/jpm.2010.36.4.077
VO 36
IS 4
A1 Jack Clark Francis
A1 Christopher Hessel
A1 Jun Wang
A1 Ge Zhang
YR 2010
UL https://pm-research.com/content/36/4/77.abstract
AB Portfolios weighted by fundamental measures of company size, such as assets, dividends, sales, earnings, and employees, have recently attracted a lot of attention. Pioneering research has showed that these fundamental value–weighted portfolios, especially dividend-weighted portfolios, can achieve better mean returns and better Sharpe ratios than could be attained with the traditional market value– weighted portfolio. In this article, the authors examine three portfolios weighted by the additional fundamental measures of firm size—share repurchases, total payout, and earnings retention—and find that the repurchase-weighted portfolios and total payout–weighted portfolios have higher excess returns and higher Sharpe ratios than the other fundamental value–weighted portfolios, including the dividend-weighted portfolio. The repurchase-weighted portfolio shows a positive and statistically significant alpha of 2.77% after controlling for the Fama–French factors (market, size, and book-to-market) and Carhart’s momentum variable. The total payout–weighted portfolio also has a positive and significant alpha, albeit smaller than that of the repurchase-weighted portfolio.TOPICS: Portfolio construction, security analysis and valuation