Gow-Cheng Huang

A twist on the Monday effect in stock returns: A note

Abstract This study introduces business cycles to analyze a twist on the Monday effect and extends the analysis to OTC stocks. We find that OTC stocks do not share the same common twist on the Monday effect as exchange-listed stocks. For OTC stocks, the twist on the Monday effect is not a robust explanation of the negative returns on Mondays. For the S & P and NASDAQ indexes, periods of economic contraction experience a more pronounced negative returns on Mondays than expansionary periods following market declines. Following market advances, the negative returns on Mondays are insensitive to the level of economic activity.

Investor opinion divergence and post-repurchase announcement stock price drift

This study examines whether investor opinion divergence is a significant determinant of post-repurchase abnormal returns. We examine the effect using abnormal trading turnover (ATO) ratio as a proxy for investor opinion divergence. While the OLS regression results show that investor opinion divergence is not related to post-repurchase performance, the quantile regression results show that the effect of investor opinion divergence on post-repurchase performance is not homogeneous across various quantile levels of post-repurchase performance. We find a positive relation between ATO ratio and post-repurchase performance for firms with lower-to-middle performance groups. For firms with middle-to-higher post-repurchase performance, pre-repurchase stock undervaluation is a key determinant of the post-repurchase performance.

Open-Market Stock Repurchases by Insurance Companies and Signaling

The signaling hypothesis of share repurchases implies that management uses repurchases to signal either that their firms future operating performance will improve or that shares of their stock are simply underpriced by the market. This study examines which of the two interpretations can better explain open‐market share repurchase programs announced by insurance companies. We find no evidence that future‐operating performance of insurers improves following the repurchase announcement. In addition, changes in future operating performance cannot explain the announcement‐period abnormal return. Instead, the stock undervaluation prior to the repurchase announcement can significantly explain the announcement‐period abnormal return, particularly for life insurers. Overall, our results suggest that the positive market reaction to insurers’ open‐market share repurchase announcements is due to the stock undervaluation by the market, but not due to positive information content about future operating performance conveyed in the repurchase announcement.