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The value increase caused by the buyback tends to disappear in a year or so. There was a study which found this, but I don’t have a reference on hand.
by scott_s 7y ago
The value increase caused by the buyback tends to disappear in a year or so. There was a study which found this, but I don’t have a reference on hand.
- AznHisoka 7y agoWhich makes sense, because usually the buy back happens during a limited period less than a year.
- jsight 7y agoI do not understand why that would happen. Wouldn't they inflate the earnings per share, resulting in a permanently higher share price (all else being equal)?
- dlp211 7y agoIf stock price was actually based on pure fundamental analysis, sure. That is not at all reality though.
- jsight 7y agoAfter I wrote that, it occurred to me that there is another counterargument. If cash-on-hand decreases along with the inflation of earnings-per-share, the business value doesn't really increase. I have always assumed that shareholders wouldn't take this into account, but maybe they deserve more credit than I've been giving them.