| Summary: | 碩士 === 義守大學 === 財務金融學系碩士班 === 95 === Stock repurchase is one of the methods that managers pay out cash to the shareholders. Many previous studies indicated that undervalue is the main motive of stock repurchase announcements. But do the management really know stock undervalued? Or they only hold psychological biases of “gambler’s fallacy” in their mind. And for the investors of stock market, how to recognize the intention of management and how they will react to the stock repurchase announcements are the questions worthy of discussion. In this study, how the investors recognize the information of stock repurchase is understood in three dimensions which are the rationality of stock price, the identification of capital source, and the variation of insider’s holdings. Being different from the past studies that look into the reaction to the stock price from announcement, how the psychological biases influence the investors’ recognition to the announcement of stock repurchase is studied further. And adopt the theory of behavioral finance to explain the investors’ behavior. The empirical results as followed:
1.Stock repurchase announcement has the positive announce effect to stock price. No matter foreign investors of high investment maturity or individual investors of low investment maturity will appear the abnormal trading volume after the announce.
2.Foreign investors use under-reaction to operate “momentum strategy” and make the good investment performance by selling losers’ stocks previously before announcement and by buying winners’ stocks after announcement. And individual investors keeping holding losers’ stocks before announcement and selling winners’ stocks after announcement immediately have the behaviors of “disposition effect”. Thus, they are limited in making profits.
3.The information of the variation of insiders’ holdings declared afterward has no any effect to returns on the market portfolio. But foreign investors buy the stocks bought before announcement by insiders in the initial period after announcement. Foreign investors keep “over-optimism” in their mind. Otherwise, individual investors sell the stocks sold before announcement by insiders. Individual investors keep “pessimism” in their mind and when the selling behavior reach after a period of time after announcement, they have the behavior of “over-reaction”.
4.Individual investors prefer to hold growth stocks because of “over-confidence”. But the results in the real verification show that large positive abnormal return create by value stocks, and has the idea that individual investors have the “representative biases”.
5.“Gambler’s fallacy” and “self-attribution biases” make the investors of the market strengthen their psychological biases more and then influence their investment behavior.
6.Stock repurchase is not always announced at the time of stock price undervalued, but on the time of stock price a little lower than the past record. Even the information sender doesn’t know the intrinsic value of stock. It seems that the sender also have “gambler’s fallacy”.
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