Do Better Informed Investors Always Do Better? A Buyback Puzzle

Type of content
Journal Article
Thesis discipline
Degree name
Publisher
Wiley
Journal Title
Journal ISSN
Volume Title
Language
English
Date
2018
Authors
Boyle G
Ward G
Abstract

© 2018 Western Economic Association International We explore the value of private investment information using data from a singular source: auctions of yearling racehorses. Horse breeders possess superior information about their own horses and have strong financial incentives to buy the best of these back at auction. However, those they repurchase subsequently perform significantly worse on average, earning 30% less at the racetrack than horses purchased by outsiders. Moreover, this underperformance is concentrated in male horses, despite these being purchased exclusively for racing purposes. These puzzling findings cannot be explained by differences in horse risk or breeder abilities, or by nonfinancial objectives, or by behavioral or selection biases. (JEL G02, G11, G14, L83, D44).

Description
Citation
Boyle G, Ward G (2018). Do Better Informed Investors Always Do Better? A Buyback Puzzle. Economic Inquiry. 56(4). 2137-2157.
Keywords
information, auctions, racehorses, buybacks
Ngā upoko tukutuku/Māori subject headings
ANZSRC fields of research
Fields of Research::35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350208 - Investment and risk management
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