Skip Navigation



RFS Advance Access published online on March 27, 2008
Review of Financial Studies, doi:10.1093/rfs/hhn024
This Article
Right arrow Full Text
Right arrow Full Text (Accepted Manuscript)
Right arrow All Versions of this Article:
22/4/1693    most recent
hhn024v1
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Peyer, U.
Right arrow Articles by Vermaelen, T.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

© The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org

The Nature and Persistence of Buyback Anomalies

Urs Peyer and Theo Vermaelen
INSEAD

Address correspondence to Theo Vermaelen, INSEAD, Boulevard de Constance, 77305 Fontainebleau, France; telephone: +33-16072-4000; e-mail: theo.vermaelen{at}insead.edu.

JEL Classification: G14, G35


  Abstract

Using recent data, we reject the hypothesis that the buyback anomalies first reported by Lakonishok and Vermaelen (1990, Journal of Finance 45:455–77) and Ikenberry, Lakonishok, and Vermaelen (1995, Journal of Financial Economics 39:181–208) have disappeared over time. We find evidence consistent with the hypothesis that open market repurchases are a response to a market overreaction to bad news: significant analyst downgrades, combined with overly pessimistic forecasts of long-term earnings. Stock prices after tender offers are set as if all investors tender their shares, but empirically they do not. Thus, the arbitrage opportunity persists because the market sets prices as if the average, not the marginal investor, determines the stock price.

We would like to thank the anonymous referee, Toby Moskowitz (the editor), and Gustavo Grullon for their suggestions, and seminar participants at the 2006 American Finance Association meetings, the 2006 European Financial Management Association meetings, the 2006 Multinational Finance Association meetings, the University of Frankfurt, the National University of Singapore, Singapore Management University, the University of Michigan, the City University of London, and the Summer Symposium on Financial Markets in Gerzensee for their comments.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?




Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.