A Free Lunch Hypothesis for Share Buybacks

Abstract

This paper introduces a novel hypothesis in the context of share buybacks, proposing the existence of a "Free Lunch" phenomenon associated with the use of specific execution products. The hypothesis posits that these products can generate consistently positive fees, offering a consistent return irrespective of market conditions. The paper emphasizes the importance of the products used in share buyback executions and their potential to create a form of risk-free benefit. Grounded in financial theories and requiring empirical examination, this hypothesis represents a new avenue for understanding and potentially enhancing the efficiency of share buyback practices.

Keywords: Share Buybacks, Free Lunch Phenomenon, VWAP, Brokerage Fees, Temporal Optionality, Monte Carlo Simulation, Corporate Governance, Benchmarking, Market Efficiency, Regulatory Framework

JEL Classification: G00, G1, G12, G14, G02, G4