Investor Sentiment Around Buybacks in the Indian Stock Market

Posted: 21 Jun 2019

See all articles by Dhruva Karir

Dhruva Karir

IIT-BHU

Utkarsh Chaturvedi

IIT-BHU

Manish Rajwar

affiliation not provided to SSRN

Abhijeet Chandra

Vinod Gupta School of Management, IIT Kharagpur

Date Written: June 15, 2019

Abstract

This study aims to explain the relationship between share buybacks and market sentiment around these events. Using data on social media posts around the share buybacks, we examine how financial indicators exhibit changes before and after the share buybacks. A sample of BSE100-listed Indian firms which had exercised share buybacks in last five years were studied with the help of two alternative models in order to understand the association of price reactions and social media sentiment around the share buybacks. Based on the sentiment index which we calculated, we observe a general pattern for all the sample companies. The sentiment index is rising for all the companies from the level before buyback to a higher level after buyback and the magnitude of change is varying, which depends on the number of factors such as volume of shares that a company has bought back, investors' perception, and so on. We know that after a buyback earning per share increases, thereby boosting investor sentiment with respect to the company. The increasing levels of the sentiment among the Investors is one of the major factors which make the prices move differently from what predicted by the models. We find that the models can be pretty inaccurate sometimes and that is because they fail to incorporate the sentiment in their predictions and it also tells us how important is the sentiment as is can boost our model’s predictive power.

Keywords: Share Buyback, Social Media, Investor Behavior, Indian Stock Market, Emerging Market

JEL Classification: D53, G12, G41

Suggested Citation

Karir, Dhruva and Chaturvedi, Utkarsh and Rajwar, Manish and Chandra, Abhijeet, Investor Sentiment Around Buybacks in the Indian Stock Market (June 15, 2019). Available at SSRN: https://ssrn.com/abstract=3405161

Dhruva Karir

IIT-BHU ( email )

Varanasi
Varanasi, 221005
India

Utkarsh Chaturvedi

IIT-BHU ( email )

Varanasi
Varanasi, 221005
India

Manish Rajwar

affiliation not provided to SSRN

Abhijeet Chandra (Contact Author)

Vinod Gupta School of Management, IIT Kharagpur ( email )

Kharagpur, 721302
India

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