MARKET UNDERREACTION TO OPEN MARKET SHARE REPURCHASES

We examine long-run firm performance following open market share repur chase announcements, 1980-1990. We find that the average abnormal four -year buy-and-hold return measured after the initial announcement is 1 2.1%. For 'value' stocks, companies more likely to be repurchasing sha res because of undervaluation, the average abnormal return is 45.3%. F or repurchases announced by 'glamour' stocks, where undervaluation is less likely to be an important motive, no positive drift in abnormal r eturns is observed. Thus, at least with respect to value stocks, the m arket errs in its initial response and appears to ignore much of the i nformation conveyed through repurchase announcements.