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Is the market underreacting or overreacting to open market share repurchases: a UK perspective

Crawford, I. and Wang, Zhiqi (2012) Is the market underreacting or overreacting to open market share repurchases: a UK perspective. Research in International Business and Finance 26 (1), pp. 26-46. ISSN 0275-5319.

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Official URL: http://dx.doi.org/10.1016/j.ribaf.2011.05.002

Abstract

Using UK open market repurchases, we reject the market underreaction hypothesis and the market overreaction hypothesis proposed by Ikenberry, Lakonishok and Vermaelen (1995) and Peyer and Vermaelen (2009), respectively. The evidence suggests that the UK market reacts slowly to actual repurchases made by value firms. UK repurchases on average do not suffer from share undervaluation prior to the announcement. Value firms perform just as well as glamour firms during the authorisation period but outperform glamour firms significantly two years following the announcement. It turns out that value firms repurchase over 6% more shares than glamour firms during the authorisation period.

Item Type: Article
Keyword(s) / Subject(s): Open market share repurchases, market underreaction or overreaction, long run abnormal returns
School or Research Centre: Birkbeck Schools and Research Centres > School of Business, Economics & Informatics > Management
Depositing User: Administrator
Date Deposited: 08 Jun 2011 14:10
Last Modified: 17 Apr 2013 12:20
URI: http://eprints.bbk.ac.uk/id/eprint/3502

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