Volatility and the buyback anomaly

Volatility and the buyback anomaly The buyback anomaly survives when using the five factor Fama and French (2015) and the four factor Stambaugh and Yuan (2017) 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 costly arbitrage hypothesis (Stambaugh et al., 2015) as well as 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Corporate Finance Elsevier

Loading next page...
 
/lp/elsevier/volatility-and-the-buyback-anomaly-dbuTTqbVuu
Publisher
Elsevier
Copyright
Copyright © 2017 Elsevier B.V.
ISSN
0929-1199
D.O.I.
10.1016/j.jcorpfin.2017.12.017
Publisher site
See Article on Publisher Site

Abstract

The buyback anomaly survives when using the five factor Fama and French (2015) and the four factor Stambaugh and Yuan (2017) 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 costly arbitrage hypothesis (Stambaugh et al., 2015) as well as 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.

Journal

Journal of Corporate FinanceElsevier

Published: Apr 1, 2018

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off