The Conditional Performance of REIT Stock Repurchases |
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Authors: | Erasmo Giambona Joseph Golec Carmelo Giaccotto |
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Institution: | (1) Gabelli School of Business, Roger Williams University, One Old Ferry Road, Bristol, RI 02809-2921, USA;(2) Department of Finance, School of Business, University of Connecticut, 2100 Hillside Road, Unit 1041, Storrs, CT 06269-1041, USA |
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Abstract: | This paper uses a conditional performance measure to test whether real estate investment trust (REIT) managers announcing
stock repurchases have private information about their firms' prospects. We use stock price to condition for public information
and measure the managers' implied private information by the covariance between repurchase size and subsequent stock payoffs
(or operating performance). Results show that managers have private information but mostly with respect to long-term as opposed
to near-term payoffs. We also find that repurchase size is positively related to a stock's idiosyncratic return volatility,
perhaps because noisy stocks deviate farther from fundamental value, offering informed managers larger profit potential.
JEL Classification G12 G14 G35 |
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Keywords: | REITs Conditional performance Noisy rational expectations Stock repurchases |
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