The conditional performance of REIT stock repurchases

This paper uses a conditional performance measure to test whether real estate investment trust (REIT) managers announcing stock repurchases have private information about their firms\u27 prospects. We use stock price to condition for public information and measure the managers\u27 implied private information by the covariance between repurchase size and subsequent stock payoffs (or operating performance). Results show that managers have private information but mostly with respect to long-term as opposed to near-term payoffs. We also find that repurchase size is positively related to a stock\u27s idiosyncratic return volatility, perhaps because noisy stocks deviate farther from fundamental value, offering informed managers larger profit potential. © Springer Science + Business Media, Inc. 2006