The Nature and Persistence of Buyback Anomalies

Posted: 23 Mar 2009

Date Written: April 2009

Abstract

Using recent data, we reject the hypothesis that the buyback anomalies first reported by Lakonishok and Vermaelen (, Journal of Finance 45:455-77) and Ikenberry, Lakonishok, and Vermaelen (, 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.

Keywords: G14, G35

Suggested Citation

Peyer, Urs C. and Vermaelen, Theo, The Nature and Persistence of Buyback Anomalies (April 2009). The Review of Financial Studies, Vol. 22, Issue 4, pp. 1693-1745, 2009. Available at SSRN: https://ssrn.com/abstract=1365688 or http://dx.doi.org/hhn024

Urs C. Peyer (Contact Author)

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4178 (Phone)
+33 1 6072 4045 (Fax)

Theo Vermaelen

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
33 1 60 72 42 63 (Phone)
33 1 60 72 40 45 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
2,332
PlumX Metrics