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Academic audit

Failedequity XS fundamental

Net Share Issuance

The three-gate gauntlet · genuine only if it clears all three and survives adversarial refutation
Gate 1
Survivorship-free
free
clean panel
Gate 2
Placebo ≥ P95
not run
Eliminated here
Gate 3
Cost-aware net
RF -0.38
net-negative after costs
Failed
Worst 12-month leg (RF)-1.00
−1.00 floor0
Every strategy here — winners included — loses in its worst 12 months. Depth is honest context, not the verdict.
Rejected at the cost gate — the net edge turns negative once modelled costs are applied.

Net share issuance, documented by Daniel & Titman (2006) in "Market Reactions to Tangible and Intangible Information", goes long firms that shrink their share count (buybacks) and short firms that expand it (heavy issuers), on the finding that issuance activity carries information the market is slow to price into returns.

What we found

On our survivorship-free US common-stock panel the long/short construction is net-negative after realistic costs (RF -0.38). The damage is concentrated in the short leg: shorting heavy issuers means shorting high-issuance growth names, and those names rallied hard through the 2005-2026 bull market, running the short leg over. The worst year is a total loss of the leg (worst-year RF -1.0). This is the same failure mode we saw with short interest — the long side may hold information, but the crowded short side gets squeezed in a sustained bull regime. There is no tradeable edge here after costs; this is a failed screen, not a diversifying factor-leg.

How we tested it
2005–2026 test windowmodelled liquidity-aware costssurvivorship free
  • Data: survivorship-free 1077-name US common-stock panel, 2005-2026. Liquidity-aware modelled costs.
  • Placebo / robustness test: real result vs 200 random baskets (real vs the random-basket percentile).
Source: Daniel & Titman (2006), "Market Reactions to Tangible and Intangible Information", Journal of Finance
Find the paper (Google Scholar) ↗
← The Academic Audit — all 57 studies

Research, not investment advice. “Validated” factor-legs are market-neutral diversifying building blocks with a losing worst year — none is a standalone tradeable strategy. Metrics are cost-aware and modelled (not live fills); the 2005–2026 test window is out-of-sample versus the source paper. Dollar figures are not returns and are omitted by design.