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Journal of Finance and Accounting. 2015, 3(2), 18-36
DOI: 10.12691/jfa-3-2-2
Open AccessArticle

The Explanation Power of Investors' Opinion Divergence in Open Market Repurchases

Xiaochun Liu1, and Hao Wang2

1Department of Economics, Finance and Insurance & Risk Management, University of Central Arkansas, Conway AR, USA

2Model Development Department, Regions Bank, Birmingham AL, USA

Pub. Date: August 09, 2015

Cite this paper:
Xiaochun Liu and Hao Wang. The Explanation Power of Investors' Opinion Divergence in Open Market Repurchases. Journal of Finance and Accounting. 2015; 3(2):18-36. doi: 10.12691/jfa-3-2-2


This paper proposes a new theory to explain the behavior of share repurchases by assuming heterogeneity in investors' beliefs. This new theory provides testable hypotheses that are examined empirically in this paper. Our empirical results show strong evidence for the explanation power of investors' opinion divergence in firms repurchasing shares, even after considering controlling variables such as the undervaluation-signaling hypothesis. The results are also robust to various measures of investors' divergent opinions in open market repurchases.

investor heterogeneity in beliefs undervaluation signaling hypothesis information asymmetry divergence of opinion firm valuation asset pricing anomalies

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