Sensitivity to investor sentiment and stock performance of open market share repurchases

Woan-lih Liang

Journal of Banking & Finance, 2016, vol. 71, issue C, 75-94

Abstract: This paper finds that stocks of repurchasers with high sensitivity to investor sentiment are more likely to be mispriced. Thus, such repurchases are followed by superior post-buyback stock performance. This abnormal return associated with sensitivity to sentiment cannot be explained by other undervaluation factors: book-to-market or prior return effects. My results are robust with factor model analysis and controls for contamination effects. I conclude that this sentiment-driven undervaluation may result from the difficulty to value and/or limits to arbitrage rather than investor overreaction.

Keywords: Repurchases; Investor sentiment; Undervaluation; Mispricing (search for similar items in EconPapers)
JEL-codes: G30 G35 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:71:y:2016:i:c:p:75-94

DOI: 10.1016/j.jbankfin.2016.06.003

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