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A reexamination of the tendering profit anomaly

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  • Palani-Rajan Kadapakkam

    (University of Texas at San Antonio)

  • Hongxian Zhang

    (Missouri University of Science and Technology)

  • Sinan Yildirim

    (Texas Wesleyan University)

Abstract

Lakonishok and Vermaelen (J Financ 45:455–477, 1990) and Peyer and Vermaelen (Rev Financ Stud 22:1693–1745, 2009) document profits of around 9% from participating in stock repurchase tender offers during the 1962–1986 and 1987–2001 periods, respectively. The persistence of such large profits over a short trading horizon constitutes a striking anomaly in financial markets. Given the rise of event-driven hedge funds, we reexamine this strategy in recent years (2000–2015) and find that abnormal profits from tendering have disappeared. Examining a sample of closed-end fund repurchase tender offers during the same period, we find abnormal tendering profits of around 0.5%. However, these profits are no longer significant after adjustments for transaction costs.

Suggested Citation

  • Palani-Rajan Kadapakkam & Hongxian Zhang & Sinan Yildirim, 2021. "A reexamination of the tendering profit anomaly," Review of Quantitative Finance and Accounting, Springer, vol. 56(4), pages 1475-1501, May.
    • Handle: RePEc:kap:rqfnac:v:56:y:2021:i:4:d:10.1007_s11156-020-00935-4
    DOI: 10.1007/s11156-020-00935-4
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