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Article

Portfolios Weighted by Repurchase and Total Payout

Jack Clark Francis, Christopher Hessel, Jun Wang and Ge Zhang
The Journal of Portfolio Management Summer 2010, 36 (4) 77-83; DOI: https://doi.org/10.3905/jpm.2010.36.4.077
Jack Clark Francis
is a professor of economics and finance in the Zicklin School of Business at Bernard Baruch College in New York, NY.
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  • For correspondence: jack@jcfrancis.com
Christopher Hessel
is an associate professor of economics and finance in the Zicklin School of Business at Bernard Baruch College in New York, NY.
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  • For correspondence: christopher_hessel@baruch.cuny.edu
Jun Wang
is an associate professor of economics and finance in the Zicklin School of Business at Bernard Baruch College in New York, NY.
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  • For correspondence: jun_wang@baruch.cuny.edu
Ge Zhang
is an assistant professor of finance at Long Island University in Brooklyn, NY.
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  • For correspondence: ge.zhang@liu.edu
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Abstract

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.

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The Journal of Portfolio Management: 36 (4)
The Journal of Portfolio Management
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Summer 2010
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Portfolios Weighted by Repurchase and Total Payout
Jack Clark Francis, Christopher Hessel, Jun Wang, Ge Zhang
The Journal of Portfolio Management Jul 2010, 36 (4) 77-83; DOI: 10.3905/jpm.2010.36.4.077

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Portfolios Weighted by Repurchase and Total Payout
Jack Clark Francis, Christopher Hessel, Jun Wang, Ge Zhang
The Journal of Portfolio Management Jul 2010, 36 (4) 77-83; DOI: 10.3905/jpm.2010.36.4.077
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