Can Managers Time the Market? Evidence Using Repurchase Price Data

57 Pages Posted: 23 Apr 2014 Last revised: 22 May 2014

Amy K. Dittmar

University of Michigan at Ann Arbor - The Stephen M. Ross School of Business

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics

Date Written: May 7, 2014

Abstract

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.

Keywords: Repurchases, Market Timing, Valuation, Long Run Performance, Payouts

JEL Classification: G35, G32

Suggested Citation

Dittmar, Amy K. and Field, Laura Casares, Can Managers Time the Market? Evidence Using Repurchase Price Data (May 7, 2014). Journal of Financial Economics (JFE), Forthcoming; Ross School of Business Paper No. 1234. Available at SSRN: https://ssrn.com/abstract=2423344 or http://dx.doi.org/10.2139/ssrn.2423344

Amy Dittmar (Contact Author)

University of Michigan at Ann Arbor - The Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-764-3108 (Phone)

HOME PAGE: http://webuser.bus.umich.edu/adittmar/

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics ( email )

419 Purnell Hall
Newark, DE 19716
United States
302-831-3810 (Phone)

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