Currrent Issue: Volume 3, Number 2, 2015


Article

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

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

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


Journal of Finance and Accounting. 2015, 3(2), 18-36
doi: 10.12691/jfa-3-2-2
Copyright © 2015 Science and Education Publishing

Cite this paper:
Xiaochun Liu, 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.

Correspondence to: Xiaochun  Liu, Department of Economics, Finance and Insurance & Risk Management, University of Central Arkansas, Conway AR, USA. Email: xliu@uca.edu

Abstract

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.

Keywords

References

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Article

Blending Scenarios into Real Options: Relevance of the Pay-off Method to Management Investment Decisions

1Small Business Research Centre, Kingston University, London, UK

2Kingston Business School, Kingston University, London, UK


Journal of Finance and Accounting. 2015, 3(2), 12-17
doi: 10.12691/jfa-3-2-1
Copyright © 2015 Science and Education Publishing

Cite this paper:
G Favato, J A Cottingham, N Isachenkova. Blending Scenarios into Real Options: Relevance of the Pay-off Method to Management Investment Decisions. Journal of Finance and Accounting. 2015; 3(2):12-17. doi: 10.12691/jfa-3-2-1.

Correspondence to: G  Favato, Small Business Research Centre, Kingston University, London, UK. Email: G.Favato@kingston.ac.uk

Abstract

This paper aims to demonstrate the relevance of the pay-off method to making management investment decisions under uncertainty. The success of the pay-off method as a replacement for the currently used option pricing algorithms was demonstrated by informing thirteen option pricing models with the same basic inputs and by comparing the mean option price obtained with the pay-off value. Everything else equal, the pay-off method demonstrated to be a useful tool to management uncertainty due to its mathematical simplicity and the possibility to embed scenario planning into the real option valuation. These benefits should make the use of real option thinking more relevant to management investment decisions under uncertainty.

Keywords

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