Security Issue Timing: What Do Managers Know, and When Do They Know It?

Dirk Jenter, Katharina Lewellen and Jerold B. Warner

No 12724, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study put option sales undertaken by corporations during their repurchase programs. Put sales' main theoretical motivation is market timing, providing an excellent framework for studying whether security issues reflect managers' ability to identify mispricing. Our evidence is that these bets reflect timing ability, and are not simply a result of overconfidence. In the 100 days following put option issues, there is roughly a 5% abnormal stock price return, and the abnormal return is concentrated around the first earnings release date following put option sales. Longer term effects are generally not detected. Put sales also appear to reflect successful bets on the direction of stock price volatility.

JEL-codes: G1 G14 G3 G32 G35 (search for similar items in EconPapers)
Date: 2006-12
New Economics Papers: this item is included in nep-mst
Note: CF AP
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Citations: View citations in EconPapers (1)

Published as Jenter, Dirk, Katharina Lewellen, and Jerold B. Warner. "Security Issue Timing: What Do Managers Know, and When Do They Know It?" Journal of Finance 66, 2(April 2011): 413-43.

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Journal Article: Security Issue Timing: What Do Managers Know, and When Do They Know It? (2011)
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