New Research from S&P Capital IQ Affirms Positive Stock Performance Behavior Following Company Stock Buyback Actions
New York, NY - January 23, 2014 - 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.
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