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Anomalous price behavior around repurchase tender offers

Author: Vermaelen, Theo ; Lakonishok, JosefINSEAD Area: FinanceIn: Journal of Finance, vol. 45, no. 2, June 1990 Language: EnglishDescription: p. 455-477.Type of document: INSEAD ArticleNote: Please ask the Library for this articleAbstract: This paper reports a new anomaly in finance: buying shares before the expiration date of a repurchase tender offer and tendering to the firm produces returns of more than 9% per week, on average. It is also found that repurchasing companies beat the value weighted index with 10% per year in the two years after the repurchase. However, after adjusting for firm size the excess return falls to 4.3% per year and the upward price drift is mainly generated by the behaviour of very small firms in the sample
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This paper reports a new anomaly in finance: buying shares before the expiration date of a repurchase tender offer and tendering to the firm produces returns of more than 9% per week, on average. It is also found that repurchasing companies beat the value weighted index with 10% per year in the two years after the repurchase. However, after adjusting for firm size the excess return falls to 4.3% per year and the upward price drift is mainly generated by the behaviour of very small firms in the sample

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