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The aim of my thesis is to investigate how share repurchases influence price efficiency. To reach this goal, I rely on the two hypotheses proposed and developed by Busch and Obernberger (2016). The first hypothesis suggests that share repurchases increase prices beyond stocks’ fundamental value, this resulting in a decrease in price efficiency. This hypothesis is based on that managers frequently use share repurchases to increase prices, especially when their compensation is partly equity based and their performance relates to their ability to create value for shareholders. If repurchases are conducted above fundamental values, they will increase the delay with which information is incorporated in the stock price and consequently, price efficiency will decrease. Alternatively, if price support is provided below fundamental values, price delay will be reduced and prices will become more efficient. 
The second hypothesis claims that share repurchases make prices more efficient by increasing either the speed or the accuracy with which available information is incorporated in stock prices. A key trait of share repurchases is that they can only incorporate positive news into stock prices, since firms that buy back are buyers of their stock. Some stocks are less visible and get no or little attention by investors (Hou and Moskowitz, 2005) and thus, share repurchases can help them become more efficiently priced by improving the speed with which positive information is incorporated into the stock price. This is because firms that repurchase their own stock can affect 3 

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investors’ neglect on their stock. Furthermore, when firms repurchase their shares at a price below the ‘true’ value, they can improve the accuracy of the incorporation of information and thus, increase price efficiency. Related literature suggests that buying back when the stock is underpriced is the most common and crucial reason to buy back shares (Dittmar, 2000). 


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