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Do Better Informed Investors Always Do Better? A Buyback Puzzle

Glenn Boyle () and Gerald Ward

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: We explore the value of private investment information using data from a singular source: auctions of yearling racehorses. Horse breeders possess superior information about their own horses and have strong financial incentives to buy the best of these back at auction. However, those they repurchase subsequently perform significantly worse on average, earning 30% less at the racetrack than horses purchased by out-siders. Moreover, this underperformance is concentrated in male horses, despite these being purchased exclusively for racing purposes. These puzzling findings can-not be explained by differences in horse risk or breeder abilities, or by non-financial objectives, or by behavioral or selection biases.

Keywords: Auctions; racehorses; buybacks (search for similar items in EconPapers)
JEL-codes: D44 G02 G11 G14 L83 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2018-04-01
New Economics Papers: this item is included in nep-des, nep-fmk and nep-upt
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https://repec.canterbury.ac.nz/cbt/econwp/1806.pdf (application/pdf)

Related works:
Journal Article: DO BETTER INFORMED INVESTORS ALWAYS DO BETTER? A BUYBACK PUZZLE (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:18/06

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