Abstract
| Original language | English |
|---|---|
| Place of Publication | Tilburg |
| Publisher | Economics |
| Number of pages | 39 |
| Volume | 2012-092 |
| Publication status | Published - 2012 |
Publication series
| Name | CentER Discussion Paper |
|---|---|
| Volume | 2012-092 |
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Keywords
- experiment
- share issue
- share repurchase
- bubble
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The Impact of Asset Repurchases and Issues in an Experimental Market. / Haruvy, E.; Noussair, C.N.; Powell, O.R.
Tilburg : Economics, 2012. (CentER Discussion Paper; Vol. 2012-092).Research output: Working paper › Discussion paper › Other research output
TY - UNPB
T1 - The Impact of Asset Repurchases and Issues in an Experimental Market
AU - Haruvy, E.
AU - Noussair, C.N.
AU - Powell, O.R.
N1 - Pagination: 39
PY - 2012
Y1 - 2012
N2 - Abstract: We create an experimental asset market in which we conduct share repurchases and share issues. Although the intrinsic value of the shares is independent of the quantity outstanding, the interventions result in changes in asset price. Specifically, we find the following. (1) A repurchase of shares increases the price of the asset, and a share issue decreases the price of the asset, compared to a benchmark of no intervention. These effects are consistent with downward-sloping demand for the asset. (2) The empirical patterns observed are consistent with a model based on that proposed by DeLong et al. (1990), which posits three trader types-- fundamental, speculator, and momentum-interacting in the market. (3) The downward pressure on prices resulting from share issues drives prices down toward, but not beyond, fundamental values. This downward resistance at the fundamental value is predicted by the model, in which it arises from the impact of an intervention on the proportion of the total stock of units and cash held by each trader type.
AB - Abstract: We create an experimental asset market in which we conduct share repurchases and share issues. Although the intrinsic value of the shares is independent of the quantity outstanding, the interventions result in changes in asset price. Specifically, we find the following. (1) A repurchase of shares increases the price of the asset, and a share issue decreases the price of the asset, compared to a benchmark of no intervention. These effects are consistent with downward-sloping demand for the asset. (2) The empirical patterns observed are consistent with a model based on that proposed by DeLong et al. (1990), which posits three trader types-- fundamental, speculator, and momentum-interacting in the market. (3) The downward pressure on prices resulting from share issues drives prices down toward, but not beyond, fundamental values. This downward resistance at the fundamental value is predicted by the model, in which it arises from the impact of an intervention on the proportion of the total stock of units and cash held by each trader type.
KW - experiment
KW - share issue
KW - share repurchase
KW - bubble
M3 - Discussion paper
VL - 2012-092
T3 - CentER Discussion Paper
BT - The Impact of Asset Repurchases and Issues in an Experimental Market
PB - Economics
CY - Tilburg
ER -