A reexamination of the tendering profit anomaly

Palani-Rajan Kadapakkam (), Hongxian Zhang () and Sinan Yildirim ()
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Palani-Rajan Kadapakkam: University of Texas at San Antonio
Hongxian Zhang: Missouri University of Science and Technology
Sinan Yildirim: Texas Wesleyan University

Review of Quantitative Finance and Accounting, 2021, vol. 56, issue 4, No 9, 1475-1501

Abstract: Abstract Lakonishok and Vermaelen (J Financ 45:455–477, 1990) and Peyer and Vermaelen (Rev Financ Stud 22:1693–1745, 2009) document profits of around 9% from participating in stock repurchase tender offers during the 1962–1986 and 1987–2001 periods, respectively. The persistence of such large profits over a short trading horizon constitutes a striking anomaly in financial markets. Given the rise of event-driven hedge funds, we reexamine this strategy in recent years (2000–2015) and find that abnormal profits from tendering have disappeared. Examining a sample of closed-end fund repurchase tender offers during the same period, we find abnormal tendering profits of around 0.5%. However, these profits are no longer significant after adjustments for transaction costs.

Keywords: Tender offer repurchases; Market efficiency; Closed-end funds; Tendering profits; G1; G14; G34 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11156-020-00935-4

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