NEW YORK, Jan. 23, 2014 /PRNewswire/ -- US firms that authorize and announce share repurchase programs, aka buybacks, have historically shown statistically and economically significant outperformance following the announcements, according to a new report issued by S&P Capital IQ, a leading provider of multi-asset class data, research and analytics. This research, authored by S&P Capital IQ's Quantamental Research team, also indicates that outperformance is greatest in smaller market capitalization stocks, and historically has continued even past the first few trading days following the announcement.
Recognizing that share repurchase programs have become increasingly prevalent over recent years -- often replacing dividends as a common method of returning shareholder capital -- the S&P Capital IQ report, entitled, "Buying Outperformance: Do Share Repurchase Announcements Lead to Higher Returns?," examines the returns surrounding buyback announcements to test whether, and when, buyback programs signal subsequent outperformance and add shareholder value. Click here for a copy of the S&P Capital IQ report.
"The goal of our research is to help investors identify those drivers that allow them to consistently beat a broad-based equity benchmark," said David Pope, Managing Director of Quantitative Research. In this case, we observed that stocks on average outperformed the equally weighted Russell 3000 by 0.60% over one month, and by 1.38% over one year periods following buyback announcements. Stocks also outperformed their sector and peer groups of similar size and value over the period Jan 2004 – July 2013."
Additional findings from the S&P Capital IQ report include:
- Outperformance is greatest among small caps or larger buybacks as a % of shares outstanding
- Disclosed insider trading and buyback announcement signals are complementary
- European stocks showed 12 month post-buyback outperformance, but no significant excess returns over shorter one month post-announcement periods
- S&P Capital IQ's quantamental research focuses on actionable investment strategies for global equity investors. The audience for its research includes US and global buy-side, hedge fund, family office, and high net worth investors.
About S&P Capital IQ
S&P Capital IQ, a business line of McGraw-Hill Financial (NYSE: MHFI), is a leading provider of multi-asset class and real time data, research and analytics to institutional investors, investment and commercial banks, investment advisors and wealth managers, corporations and universities around the world. We provide a broad suite of capabilities designed to help track performance, generate alpha, and identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as the S&P Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Capital IQ Valuations; and research offerings, including Leveraged Commentary & Data, Global Markets Intelligence, and company and funds research, S&P Capital IQ sharpens financial intelligence into the wisdom today's investors need. For more information visit: www.spcapitaliq.com.
All information provided by S&P Capital IQ is impersonal and not tailored to the needs of any person, entity or group of persons. Past performance is no indication of future results. This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only current as of the stated date of their issue. Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate. Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The information contained in this report does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you nor is it considered to be investment advice. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice.
SOURCE S&P Capital IQ