External Financing

The 'External Financing' area summarizes papers implementing trading strategies that take positions based on firms' recent capital market transactions. Long positions are taken in securities of firms that have recently retired capital and short positions are taken in securities of firms that have recently issued new capital.

Ritter (2003) ^aaa

Provides a good summary of the relation between various corporate financing activities and future stock returns.

Richardson and Sloan (2003) ^aaa[Click Here to Download as PDF]: Develops a parsimonious measure of net external financing and shows that it has a strong and robust relation with future stock returns.