Keywords
REIT repurchases, straddle hypothesis, stock price reaction
Abstract
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 ‘‘straddle’’ 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.
Original Publication Citation
REIT Stock Repurchases: Completion Rates, Long-Run Returns, and the Straddle Hypothesis, with Greg Adams and Andrew Holmes, Journal of Real Estate Research, Vol. 29, No. 2, 2007, 115-136.
BYU ScholarsArchive Citation
Adams, Gregory L.; Brau, James C.; and Holmes, Andrew, "REIT Stock Repurchases: Completion Rates, Long-Run Returns, and the Straddle Hypothesis" (2007). Faculty Publications. 9171.
https://scholarsarchive.byu.edu/facpub/9171
Document Type
Peer-Reviewed Article
Publication Date
2007
Publisher
Journal of Real Estate Research
Language
English
College
Marriott School of Business
Department
Finance
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