What does it mean about the institutional trading around repurchase announcements?

Expert Solution

Repurchase announcements creates a competitive environment among institutional investors due to asymmetric availability of information. As firm and insiders already have information of repurchase prior to announcement in respect to timings and pricing of repurchase, institutional investors foresight the trading profitability due to lack of information availability.

Due to aggressive competition among the institutional traders, there is a strong efficient market scenario.

All the three participants i.e. firm, insiders and institutional investors actively participate around the repurchase announcement. Repurchase announcements are a good opportunity for the institutional investor as market become highly volatile and prices of the shares increases rapidly.

Institutional investors take advantage of the foresight ability for trade profitability as their main competitors are firm and insiders, who already have information about the repurchase timing.

jeff jeffy answered 1 year ago

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