Do Better Informed Investors Always Do Better? A Buyback Puzzle

52 Pages Posted: 22 Apr 2014 Last revised: 17 Aug 2023

See all articles by Glenn Boyle

Glenn Boyle

University of Canterbury - Economics and Finance; Sapere Research Group

Gerald Ward

University of Canterbury - Economics and Finance

Date Written: April 3, 2018

Abstract

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 under-performance is concentrated in male horses, despite these being purchased exclusively for racing purposes. These puzzling findings can- not be explained by differences in horse risk or breeder abilities, or by non-financial objectives, or by behavioral or selection biases.

Keywords: information, auctions, racehorses, buybacks

JEL Classification: G02, G11, G14, L83, D44

Suggested Citation

Boyle, Glenn and Ward, Gerald, Do Better Informed Investors Always Do Better? A Buyback Puzzle (April 3, 2018). Available at SSRN: https://ssrn.com/abstract=2427139 or http://dx.doi.org/10.2139/ssrn.2427139

Glenn Boyle (Contact Author)

University of Canterbury - Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

Sapere Research Group ( email )

Level 9, Pencarrow House
1 Willeston St
Wellington, 6140
New Zealand

Gerald Ward

University of Canterbury - Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
114
Abstract Views
865
Rank
436,129
PlumX Metrics