Volatility and the Buyback Anomaly

50 Pages Posted: 27 Mar 2016 Last revised: 15 Feb 2017

See all articles by Theodoros Evgeniou

Theodoros Evgeniou


Enric Junqué de Fortuny


Nick Nassuphis

Check Company

Theo Vermaelen

INSEAD - Finance; European Corporate Governance Institute (ECGI)

Date Written: February 15, 2017


The buyback anomaly survives when using the five factor Fama and French (2015) and the four factor Stambaugh and Yuan (2016) models: buyback announcements are followed by positive long-term excess returns that are positively related to (idiosyncratic) volatility, inconsistent with the low volatility anomaly. The results are consistent with the market timing hypothesis: the option to take advantage of undervalued stock is more valuable when firm value is more uncertain or is more driven by company-specific information. Combining volatility with undervaluation indicators proposed by Peyer and Vermaelen (2009) improves the predictability of excess returns after buyback announcements.

Keywords: Share Buybacks, Seasoned Equity Offerings, Anomalies

JEL Classification: G35, G14, G32

Suggested Citation

Evgeniou, Theodoros and Junqué de Fortuny, Enric and Nassuphis, Nick and Vermaelen, Theo, Volatility and the Buyback Anomaly (February 15, 2017). INSEAD Working Paper No. 2017/16/DSC/FIN, Available at SSRN: https://ssrn.com/abstract=2754638 or http://dx.doi.org/10.2139/ssrn.2754638

Theodoros Evgeniou (Contact Author)

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex

Nick Nassuphis

Check Company ( email )

Theo Vermaelen

INSEAD - Finance ( email )

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

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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