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