GUTMANN CENTER FOR PORTFOLIO MANAGEMENT at the University of Vienna - http//:www.gutmann-center.at invites to the following PUBLIC LECTURE: (Apologies for any cross-listings!): Date: May 31st, 2006 - 4.00 p.m. Location: Bank Gutmann AG, Schwarzenbergplatz 16, 1010 Wien (Austria) Speaker: Prof. Dr. THEO VERMAELEN http://www.insead.edu/facultyresearch/faculty/profiles/tvermaelen/ Title: "BEATING THE MARKET WITH BUYBACKS" When firms announce plans to repurchase shares in the market, they often state that their shares are undervalued. In spite of this claim stock prices only increase slightly around the announcement. We show that, on average, the market is wrong, and managers are right: stock prices significantly under-react to buyback announcements. Of course, not every buyback is driven by undervaluation. In order to distinguish companies that repurchase shares because they are cheap from those that repurchase shares for other reasons, we develop an undervaluation index. The index measures the probability that the repurchase is driven by undervaluation. A portfolio strategy that invests in high undervaluation index stocks beats the Fama-French 3 factor model benchmark by 45 %, after 3 years. The strategy is stable over time in the sense that a buyback portfolio that consists of the 50 companies with the highest undervaluation index during the previous year, always beats the benchmark over the next 3 and 4 years. About Theo Vermaelen: Theo Vermaelen is the Schroders Professor of International Finance and Asset Management at INSEAD. He received his Ph.D. and MBA at the University of Chicago. Professor Vermaelen has published more than 10 articles on share repurchases in leading academic journals such as the Journal of Finance and the Journal of Financial Economics and is also the author of “Share Repurchases” published by NOW publishers. In addition he has extensive practical experience implementing the strategies suggested by his research as a portfolio manager of the KBC equity buyback fund, until 2004. He is planning to launch a new fund in the fall of this year. Please REGISTER: Mail: gutmann.bwl(a)univie.ac.at Phone: +43-1-4277-38186 - Fax: +43-1-4277-38074 Contact and further information: Gutmann Center for Portfolio Management University of Vienna - Mag. Dorothea GRIMM Bruenner Str. 72 - 1210 Wien (Austria) phone: +43-1-4277-38186 - fax: +43-1-4277-38074 mail: gutmann.bwl(a)univie.ac.at - web: www.gutmann-center.at