REIT Stock Repurchases: Completion Rates, Long - Run Returns, and the Straddle Hypothesis
This study of real estate investment trusts (REITs) analyzes three possible explanations for the stock price reaction to a repurchase announcement and the subsequent repurchase behavior of managers under each hypothesis. Two of the hypotheses, the signaling hypothesis and the exchange option hypothesis, are established in the existing literature; the third hypothesis is a modification of the exchange option hypothesis. The exchange option hypothesis is extended to allow for additional flexibility in management decisions. This extended exchange option hypothesis is termed the â€˜â€˜straddleâ€™â€™ hypothesis because it provides management with both a call and put option. The empirical analyses show the straddle hypothesis is a more robust explanation of changes in shares outstanding in the postannouncement period than the alternative explanations.
Volume (Year): 29 (2007)
Issue (Month): 2 ()
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