The impact of asset repurchases and issues in an experimental market

E. Haruvy, C.N. Noussair, O.R. Powell

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We create an experimental asset market in which the value of the shares is independent of the quantity outstanding, and find that (i) repurchases increase, whereas share issues decrease, the price of the asset. These effects are consistent with downward-sloping demand for the asset. (ii) This behavior is consistent with three trader types—fundamental, speculator, and momentum—interacting in the market. (iii) Share issues drive prices down toward, but not beyond, fundamental values. This downward resistance at the fundamental value is predicted by the impact of an intervention on the proportion of units and cash held by each trader type.
Original languageEnglish
Pages (from-to)681-713
JournalReview of Finance
Volume18
Issue number2
DOIs
Publication statusPublished - Apr 2014

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