Investor Inattention and Under-Reaction to Repurchase Announcements.
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| Title: | Investor Inattention and Under-Reaction to Repurchase Announcements. |
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| Authors: | Cheng, Lee-Young (AUTHOR), Yan, Zhipeng (AUTHOR), Zhao, Yan (AUTHOR), Gao, Li-Ming (AUTHOR) |
| Source: | Journal of Behavioral Finance. Jul-Sep2015, Vol. 16 Issue 3, p267-277. 11p. |
| Subjects: | Investors, Announcements, Stock prices, Stock repurchasing, Organizational performance |
| Abstract: | This paper investigates investor inattention as a plausible explanation for market reaction to repurchase announcements. We use prior turnover as the proxy for investor attention to examine the difference in stock price performance between low-attention stocks and high-attention stocks. We find that low prior turnover firms experience greater underreaction to repurchase announcements than high prior turnover firms. Low prior turnover firms also experience larger positive long-run excess returns following announcements. Furthermore, a higher level of investor's inattention leads to higher degree of underreactions, resulting in higher actual completion rates. JEL Classifications: G14, G15 [ABSTRACT FROM AUTHOR] |
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| Database: | Psychology and Behavioral Sciences Collection |
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| Abstract: | This paper investigates investor inattention as a plausible explanation for market reaction to repurchase announcements. We use prior turnover as the proxy for investor attention to examine the difference in stock price performance between low-attention stocks and high-attention stocks. We find that low prior turnover firms experience greater underreaction to repurchase announcements than high prior turnover firms. Low prior turnover firms also experience larger positive long-run excess returns following announcements. Furthermore, a higher level of investor's inattention leads to higher degree of underreactions, resulting in higher actual completion rates. JEL Classifications: G14, G15 [ABSTRACT FROM AUTHOR] |
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| ISSN: | 15427560 |
| DOI: | 10.1080/15427560.2015.1065264 |
