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Buybacks are back: strategy pays off with returns of 103.5 per cent in first year

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In April 2009 we published a list of 24 stocks on the INSEAD Knowledge website (see Table 1). The stocks were chosen on the basis of the strategy outlined in our paper ( The Nature and Persistence of Buyback Anomalies, Review of Financial Studies, 2009), which is a more refined implementation of buyback investing, first proposed by Ikenberry, Lakonishok and Vermaelen (Market underreaction to open market repurchases, Journal of Financial Economics, 1995). The basic strategy is to invest in US companies (1) that announce open market repurchase programmes and (2) that seem to be motivated by an undervalued stock price. Past research has shown that such a strategy has consistently beaten the market during the last 25 years.

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en

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text/html

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http://knowledge.insead.edu/finance-buybacks-are-back-100409.cfm

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Copyright INSEAD. All rights reserved