Date of Award
2008
Degree Type
Honors Paper
First Advisor
Frank W. Bacon, Ph.D.
Abstract
The purpose of this study was to test the semi-strong form efficient market hypothesis by analyzing the effects of stock repurchase announcements on stock price. Specifically, is it possible to earn an above normal return on a publicly traded stock when thefirm announces a stock repurchase? Numerous past studies suggest that with a stock repW'chase announcement goes a positive signal about the company's future, thereby significantly increasing the firm's stock price. Firms repurchase undervalued stock, thus raising the stock price. According to the semi-strong form efficient market hypothesis, it is not possible to consistently outperform the market -adjusted appropriately for risk - by using publicly available information such as stock repurchase announcements. This type of information should impound stock price sufficiently fast to disallow any investor's earning an above normal risk adjusted return. Evidence here supports the positive signal associated with the sample stock repurchase announcements examined. Likewise, the study results support the semi-strong form efficient market hypothesis and suggest the possibility of trading on ihis information up to 30 days prior to the announcement. Specifically,for this study the announcement of a stock repurchase -is viewed with a mixed signal, negative before the announcement and immediate positive reaction afterwards.
Recommended Citation
Kinsler, Nicholas A., "STOCK REPURCHASE ANNOUNCEMENTS: A TEST OF MARKET EFFICIENCY" (2008). Theses & Honors Papers. 188.
https://digitalcommons.longwood.edu/etd/188
