Can Managers Time the Market? Evidence Using Repurchase Price Data
Amy K. Dittmar
University of Michigan at Ann Arbor - The Stephen M. Ross School of Business
Laura Casares Field
Pennsylvania State University - Smeal College of Business
May 7, 2014
Journal of Financial Economics (JFE), Forthcoming
Ross School of Business Paper No. 1234
Little is known about the price firms pay for stock repurchases. Using a dataset of all U.S. repurchases from 2004 to 2011, we compare the actual average price paid monthly in a repurchase to the average market price for the same stock over various horizons. We find that firms repurchase stock at a significantly lower price than the average market price in all sample years. Less frequent repurchasers, firms that repurchase when insiders buy on their own account, and firms that experience low stock returns prior to the repurchase obtain significantly lower prices. After controlling for risk factors, repurchasing firms earn positive returns; infrequent repurchasers earn a significantly higher return up to three years following the actual repurchase.
Number of Pages in PDF File: 57
Keywords: Repurchases, Market Timing, Valuation, Long Run Performance, Payouts
JEL Classification: G35, G32working papers series
Date posted: April 23, 2014 ; Last revised: May 22, 2014
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