During the 1980s, U.S. firms announcing stock repurchases earned favorable long-run returns. Recently, concerns have been raised over the robustness of these findings. This concern comes at a time of explosive growth in repurchase programs. Thus, we study new evidence from the 1990s for 1,060 Canadian repurchase programs. Moreover, because of Canadian law, we can carefully track repurchase activity monthly. Similar to the U.S., the Canadian stock market discounts the information in repurchase announcements, particularly for value stocks. Completion rates in Canada are sensitive to mispricing. Trades also appear linked to price movements; managers buy more shares when prices fall. 1 In recent years, corporations have dramatically increased the amount of capital devoted to repurchasing their own shares. In the mid-1980s, repurchase program announcements in the U.S. amounted to roughly $25 billion per year. Between 1996 and 1998 however, more than 4,000 open market repurchase programs w...

Abslract. The article considers the possibility that asset prices might deviate from intrinsic values based on market fundamentals. Three broad categories of theory are surveyed: (a) growing bubbles (b) fads and (c) information bubbles. 'Sunspot' theories are also discussed. The paper covers both theory and evidence, and directions for future research are discussed.

The fragility of the CAPM has led to a resurgence of research that frequently uses trading strategies based on sorting procedures to uncover relations between firm characteristics (such as “value ” or “glamour”) and equity returns. We examine the propensity of these strategies to generate statistically and economically significant profits due to our familiarity with the data. Under plausible assumptions, data-snooping can account for up to 50 percent of the insample relations between firm characteristics and returns uncovered using single (one-way) sorts. The biases can be much larger if we simultaneously condition returns on two (or more) characteristics.

The efficient markets hypothesis (EMH) maintains that market prices fully reflect all available information. Developed independently by Paul A. Samuelson and Eugene F. Fama in the 1960s, this idea has been applied extensively to theoretical models and empirical studies of financial securities prices, generating considerable controversy as well as fundamental insights into the price-discovery process. The most enduring critique comes from psychologists and behavioural economists who argue that the EMH is based on counterfactual assumptions regarding human behaviour, that is, rationality. Recent advances in evolutionary psychology and the cognitive neurosciences may be able to reconcile the EMH with behavioural anomalies.

This paper primarily aims to test informational efficiency of the Turkish stock market with respect to daily changes in such variables as overnight interest rates, the US dollar, German mark, currency basket, free reserves of banks, currency in circulation, money supply aggregates defined as M1 and M2, reserve money, monetary base and central bank money. Semi-strong form efficiency is tested by using structural models in which each information variable is decomposed into its anticipated and unanticipated components by employing higher-order autoregressive integrated moving average (ARIMA) models. The paper reports significant deviations from efficient market hypothesis in the Turkish stock market for the period January 1989 to July 1995. The results of the paper have two major implications. First, domestic investors as well as foreign investors who hold approximately 25 % of total tradable shares in Turkey may benefit from the empirical results of the paper to develop profitable trading strategies since all information variables are low-cost and readily accessible. This result is of particular importance to the investors of the European Community (EC) due to the Customs Union Agreement, which has been effective on 1 January 1996, between Turkey and the EC. Second, resources do not seem to be devoted to their best alternatives available; i.e., allocative efficiency appears to remain unachieved.

This paper uses long-run real price and dividends series to investigate for the German stock market the questions asked of the U.S. market by Shiller (1989). It tries to determine in what periods and to what degree the German stock market has also possessed “excess volatility ” in the past century. It finds no evidence of excess volatility in the pre-World War I German stock market. By contrast, there is some evidence of excess volatility in the post-World War II German stock market. The role played by the German Großbanken in the pre-World War I stock market might be the

The purpose of this report is to review the evidence on the profitability of technical analysis. To achieve this purpose, the report comprehensively reviews survey, theoretical and empirical studies regarding technical trading strategies. We begin by overviewing survey studies that have directly investigated market participants ’ experience and views on technical analysis. The survey literature indicates that technical analysis has been widely used by market participants in futures markets and foreign exchange markets, and that about 30 % to 40 % of practitioners appear to believe that technical analysis is an important factor in determining price movement at shorter time horizons up to 6 months. Then we provide an overview of theoretical models that include implications about the profitability of technical analysis. Conventional efficient market theories, such as the martingale model and random walk models, rule out the possibility of technical trading profits in speculative markets, while relatively recent models such as noisy rational expectation models or behavioral models suggest that technical trading strategies may be profitable due to noise in the market or investors ’ irrational behavior. Finally, empirical studies are surveyed. In this report, the empirical literature is categorized into two

this paper. I received helpful comments from Doug Diamond, Eugene Fama, Mark Watson, and Jack Wilson

The primary objective of this paper is to test informational efficiency of the financial market in a developing country, namely Turkey. Semi-strong form efficiency in stock market, foreign exchange market and interbank money market is investigated by using the direct Granger-causality tests. The paper reports significant deviations from efficient market hypothesis with respect to changes in market liquidity in all markets above for the period January 1989 to July 1995. It is also found that these markets are pairwise interdependent. However, market liquidity cannot be predicted by using developments in the financial market. The results of the paper have three major implications. First, domestic investors as well as foreign investors may benefit from the empirical results of the paper to develop profitable trading strategies since all information variables are low-cost and readily accessible. This result is of particular importance to the investors of the European Community (EC) due to the Customs Union Agreement, which has been effective on 1 January 1996, between Turkey and the EC. Second, market participants cannot anticipate market liquidity by using financial market information. This is important for monetary policymaker in accommodation of daily market liquidity. Third, resources do not seem to be devoted to their best alternatives available; i.e., allocative efficiency appears to remain unachieved.

U niv e r s ity of P e nnsy lv ania Market experiments designed to test whether individual errors are reduced by markets generally indicate that errors do make prices or trading volume irrational. For example, in markets for assets of uncertain value a "representativeness"-based theory predicts deviations of prices from Bayesian predictions. Endowment effects and optimism about relative trading ability lead to trading volumes which are too low or too high. Forecasts of future prices in markets violate rational expectations restrictions. And subjects do not ignore their own information when making forecasts of the forecasts of others. These data suggest that individual errors are often reduced, but not eliminated, in experimental markets under ideal learning conditions. They cast doubt on the optimistic presumption that prices negotiated in competitive market settings will reflect true values. The markets are unusually competitive, but the results suggest that errors are likely to be important in two-party negotiations and other settings too. @ 1992 Academic press, Inc.