Analysis : Buyback of Shares

RESULTS

·         The buyback news in the market creates abnormality in the return and volume of the script, so that investor should not treat that markets are always efficient.

·         Investors should behave rationally while taking their decision regarding investment in any script. They should wait for the abnormality in the script to be removed before investing in it.

·         Investors should consider the fundamentals of the company before investing in it and should consider the actual performance of the company over the period of time.

·         Buyback as a corporate event affects the share prices of the firm for a specific time period only. As buyback event gets over the abnormality in the script is removed and the stock prices start reflecting its actual value. So investors should not get lured by the buybacks.

·         A huge positive abnormal return before the buyback indicates the sins of leakage of any insider information. So the investor must check room for such insider information before investing in that company. This will help them to protect themselves from future losses.

CONCLUSION

·         This study examines the relation between buyback decision and its impact on the market price of the stock.

·         The information about the corporate buyback policies brings abnormality in the market and market does perform efficiently.

·         The movements in stock prices and trading volume are influenced by the flow of new information into the market.

·         The buyback effect are reflected into the market price of the company within the time period of few days before the announce date to few days after the buyback date.

·         Insider information plays vital role in the fluctuations of stock price and trading volume of and company which has declared buyback.

·         It can be concluded from this study that there is linear relationship between buyback decision and market price of the company for a limited duration. Thereafter the markets start behaving efficiently and absorb all the available information in the market.

Buyback of Shares

INTRODUCTION

A project in a brokerage firm enables one to not only understand the working of a financial institution associated with the stock market but also provides one with an opportunity of knowing the why and how of making right investments in Indian context which are the key drivers for propelling its growth.

Research Problem:

Efficient Market Hypothesis states that it is impossible to beat the market because the stock market efficiency causes the stock prices to incorporate and reflect all the new information in the stock prices. We want to study whether the markets are efficient when the buyback policy is announced by the corporate. There are certain issues which are to be focused upon. They are:

·         To find out any relation between corporate buyback policy and market value of a company.

·         To analyze the effect of corporate buyback decisions in terms of creating abnormality in the price and volume of the company.

·         To check whether the markets are efficient when any news about buyback decisions of a company is received.

Objective

·         To explore the insight of a corporate event named “BUYBACK OF SHARES” which drags lot of attention and results into many drastic changes in the market valuation of the firm.

·         To study the impact of “Buyback” on the price and volume before and after such buyback is announced.

·         To check whether abnormality exists in the price and volume of the share as the “buyback” is announced.

·         To find out the room for leakage of any insider information about “buyback” of a company.

·         To check whether any insider information plays any part in abnormal trading effect and abnormal price effect in a script.

·         To analyze the bearing of such abnormality (if it does exist) on the market capitalization and volumes traded on the stock market a month before the Announcement Date and a month after the buyback date for all the scripts under the study.

·         To measure the cumulative impact of “Corporate Buyback Policy” and try to conceive a general trend based on it.

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