The Impact of Asset Repurchases and Issues in an Experimental Market | Zendy

Ernan Haruvy | Zendy; Charles Noussair | Zendy; Owen Powell | Zendy

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The Impact of Asset Repurchases and Issues in an Experimental Market

Author(s) -

Ernan Haruvy,

Charles Noussair,

Owen Powell

Publication year - 2013

Publication title -

european finance review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 4.933

H-Index - 61

eISSN - 1573-692X

pISSN - 1382-6662

DOI - 10.1093/rof/rft007

Subject(s) - asset (computer security) , value (mathematics) , cash , momentum (technical analysis) , monetary economics , business , financial economics , economics , market value , finance , mathematics , computer security , computer science , statistics

We create an experimental asset market in which the value of the shares is independent of the quantity outstanding, and find that (i) repurchases increase, whereas share issues decrease, the price of the asset. These effects are consistent with downward-sloping demand for the asset. (ii) This behavior is consistent with three trader types—fundamental, speculator, and momentum—interacting in the market. (iii) Share issues drive prices down toward, but not beyond, fundamental values. This downward resistance at the fundamental value is predicted by the impact of an intervention on the proportion of units and cash held by each trader type

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