Can the information content of share repurchases improve the accuracy of equity premium predictions?

• We study the role of share repurchases in predicting UK and French equity premia.
• We employ both actual and proxy share repurchase data.
• Actual share repurchases do not lead to better equity premium predictions.
• The predictive content of proxies is not in line with that of actual repurchases.
• Results based on economic value are consistent with the statistical results.

We adjust the dividend–price ratio for share repurchases and investigate whether predictive power can be improved when constructing forecasts of the UK and French equity premia. Regulations in the two largest European stock markets allow us to employ actual repurchase data in our predictive regressions. Hence, we are able to overcome problems associated with markets characterised by less stringent disclosure requirements, where investors might have to rely on proxies for measuring repurchase activity. We find that predictability does not improve either in a statistical or in an economically significant sense once actual share repurchases are considered. Furthermore, we employ a proxy measure of repurchases which can be easily constructed in international markets and demonstrate that its predictive content is not in line with that of the actual repurchase data.