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TRMB 0.000476247 0.918065855 Stock Repurchase Announcements In order to g et the normal expected returns, th e risk-adjusted method was used. The expected return for each stock, for each day of the event period (day -30 to day +30) was calculated as: E(R) = alpha + Beta (Rm), Rm is the return on the market (S&P 500 index). Then, the excess return (ER) was calculated as: ER = Actual Daily Return (R) – Expected Return E(R). Average Excess Returns ( AER) was calculated (for e ach day fro m -30 to +30) b y averaging the excess r eturns for all the firms for the given day. AER = Su m of Excess Re turns for the given day / num ber of firms in sam ple. Cum ulative AER ( CAER) was calculat ed by adding or accumulating the AERs for each day from -30 to +30. Graphs of AER and Cumulative AER are plotted for the event period to display how the market performs each day of the event period (day -30 to +30). QUANTITATIVE TESTS AND RESULTS Did the m arket react to the stock repurchase announcem ents? Was the inf ormation surrounding the event significant? A’priori, one would expect there to be a sig nificant difference in the Actual Average D aily Returns (Day -30 to Day +30) and the Expected Average Daily Returns (Day -30 to Day +30) if the information surrounding the event impounds new, significant information on the m arket price of the fir ms' stock (see AER graph in Cha rt 1 below). If a significant risk adjusted di fference is o bserved, then we support our hypothesis that this t ype of information did in fact sig nificantly either increas e or decrease stock price. To statistically test for a difference in the Actual Daily Average Returns (for the firms over the time periods day -30 to day +30) and the Expected Daily Average Returns (for the firms over the time periods day -30 to day +3 0), we conducted a paired sam ple t-test and fo und a significant dif ference at th e 5% level between actual average daily returns and the risk adjusted expected average daily returns over the event period. R esults here support t he alternative hyp othesis H21: The risk adjusted return of the stock price of the sam ple of firms an nouncing sto ck repurchases is significantly discernable around the announcem ent date as defined by the event period. This finding supports the significance of the information around the event since the market’s reaction was observed. Is it possible to isolate and observe the sample’s daily response to the announcement of a stock repurchase from day -30 to day +30? If so, at what level of efficiency (weak, semi-strong, strong form according to e fficient market theory) did the market respond to the information and what are the im plications for market efficiency? Another purpose of this analy sis was to test the efficiency of the market in reacting to the repurchase announcement. Specifically, do we observe weak, semi-strong, or stro ng form market efficiency as d efined by Fama (1970) in the efficient market hypothesis? The key in the analy sis or t ests is to deter mine if the AE R (Average Excess Return) and CAER (Cu mulative Average Excess R eturn) are significantly different from zero or that there is a visible graphical or statistical relationship between time and either AER or CAER. See AER an d CAER graphs in Charts 1 and 2 below. T-tests of AER and CAER both t ested different from zero at the 1% level of significance. Likewise, observation of Chart 2 (graph of CAER from day –30 to day +30) confirms the significant reaction of the risk-adjusted returns of the sample of firms tested to the announcement of stock repurchases. ASBBS E-Journal, Volume 4, No.1, 2008 102
Kinsler and Bacon Chart 1: AVERAGE EXCESS RETURN OVER EVENT PERIOD Chart 2: CUMULATIVEAVERAGE EXCESS RETURN OVER EVENT PERIOD Chart 2 sho ws a decrease in stock pr ice fo r the sam ple of firms announcing a stock repurchase fr om day -30 t o the announcement da te followed by an i mmediate and significant price increase on the an nouncement day 0. F ollowing the an nouncement, the sam ple of repurchase fi rms maintained and slightly elev ated the significant positive im pact on ret urn (apparently triggered by the news) for t he majority of the event period to da y +21. The evidence supports the alternative hypothesis H11: The risk adjusted return of the stock price of the sam ple of firms announcing stock repurchases i s significantly affected by this type of information on the announcement date. For t he sample of firms anal yzed, an invest or is unable t o earn an above normal risk adjusted return by acting on the public announcement of a stock repurchase. After ASBBS E-Journal, Volume 4, No.1, 2008 103
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ASBBS eJournal Volume 4, No.1, 2008
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THE SUPREME COURT GRANTS CERTIORARI
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Deductibility of investment fees…
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Mellon Bank, N.A. v. United States,
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Dhareshwar and Bacon shows the exis
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Fekula and Hornyak of qualit y rese
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Fekula and Hornyak WA St Louis 4.1
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Fekula and Hornyak VA Commonwealth
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Grady, Maniam and Leavell economic
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Grady, Maniam and Leavell my brothe
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Hotel Guestroom Technology ourselve
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Accounting for Income Taxes 1920-19
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SUSTAINABLE GROWTH MODELING: A LONG
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Growth …Analysis of Harley-Davids
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INNOVATIVE HRM: HOW HR ACTIVITIES C
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Innovative HRM where open communica
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Zomorrodian, A (1999) “Learning O
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