The impacts of investor sentiment and price uncertainty on the effects of open-market share repurchase announcements

ABSTRACT

This study probes into relationship between investor sentiment and cumulative abnormal returns (CAR) of share repurchase announcements, and it treats market return as threshold variable. By threshold regression model, it tries to find the effect of market situations on relation between investor sentiment and CAR. According to empirical result, in share market of Taiwan, investor sentiment can explain CAR. When share market is extremely pessimistic (market return lower than −16.0053%), relation between investor sentiment and CAR will change to some degree. In addition, relation between price risk of announcement company and CAR will disappear with the extremely pessimistic situation of market.

KEYWORDS:

• Investor sentiment
• announcement effect
• market situations
• price uncertainty
• threshold regression model

JEL CLASSIFICATION:

• G14
• C12

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ In this study, when [−20, +60] is event window, maximum of average CAR as 3.2826% is shown on the fortieth trading day after event date.