uploads///SP  Index Cash and Short Term Investment Per Share

Analyzing Aggregate Corporate Cash Holdings

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Apr. 21 2016, Published 7:49 a.m. ET

Aggregate cash and short-term investment per share

Since 1Q15, the cash and short-term investment per share were down a little. For the last two quarters of 2015, the cash and short-term investment trend touched year lows. During this period, share buybacks were almost equal to the levels seen during 2Q07 and 3Q07. Share buybacks were one of the important reasons behind the aggregate fall in the cash level of S&P 500 index (SPXL) (VOO) (VFINX) constituent companies. In 1Q16, the aggregate cash and short-term investment per share of the S&P 500 index (IWM) (IVV) were near the level seen in 3Q15.

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Historical analysis

On a ten-year historical basis, when buybacks increased significantly compared to previous quarters, the aggregate cash and short-term investments per share haven’t gone down. In 2015, the increase in buybacks led to a fall in the aggregate cash and short-term investments per share. Higher cash flow in the period before 2015 could be one of the reasons that impacted corporates’ cash position.

In the next part of this series, we’ll analyze what the trend of mergers and acquisition is indicating with the quarterly change in interest rate.

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