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The Optimal Timing of Open Market Stock Repurchases

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  • Chih-Chen Hsu
  • Andreas Krause

Abstract

Using a continuous-time real options approach we determine the conditions under which a value-maximizing company would conduct an open market stock repurchase to exploit the undervaluation of shares. We find the optimal timing of such repurchases as well as the optimal amount a company should repurchase and analyze how it depends on market parameters. Obtaining the announcement returns from the authorization of stock repurchases from our model allows us to derive testable empirical implications.

Suggested Citation

  • Chih-Chen Hsu & Andreas Krause, 2016. "The Optimal Timing of Open Market Stock Repurchases," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(4), pages 776-785, April.
    • Handle: RePEc:mes:emfitr:v:52:y:2016:i:4:p:776-785
    DOI: 10.1080/1540496X.2015.1117840
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