Investor Inattention and Under-Reaction to Repurchase Announcements

Document Type

Article

Publication Date

7-3-2015

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

Identifier

84940386092 (Scopus)

Publication Title

Journal of Behavioral Finance

External Full Text Location

https://doi.org/10.1080/15427560.2015.1065264

e-ISSN

15427579

ISSN

15427560

First Page

267

Last Page

277

Issue

3

Volume

16

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