This paper examines the market reaction to open market share repurchase announcements between 1980 and 1990. The authors find that the average abnormal four-year buy-and-hold return following such announcements is 12.1 percent. For "value" stocks, where undervaluation is more likely, the average abnormal return is 45.3 percent, suggesting that the market initially underreacts to these announcements. In contrast, for "glamour" stocks, where undervaluation is less likely, no positive drift in abnormal returns is observed. The authors hypothesize that the market treats repurchase announcements with skepticism, leading to a slow adjustment in prices over time. They refer to this as the Underreaction Hypothesis. The study also finds that long-term performance following repurchase announcements is significantly higher than that of a control portfolio, with value stocks showing the most substantial abnormal returns. The authors conclude that the market underreacts to repurchase announcements, and that the long-term performance of firms repurchasing their shares is significantly better than that of a control group. The findings are robust to various tests, including those involving takeovers, performance measurement, and multiple announcements. The study provides evidence that managers may have accurate information about the value of their stocks and that the market may not fully incorporate this information in the short term. The results suggest that share repurchases can be a valuable signal to the market, and that the long-term performance of firms repurchasing their shares is significantly better than that of a control group. The study also finds that the market reaction to repurchase announcements is similar across all book-to-market groups, suggesting that the initial market reaction is not strongly influenced by the firm's book-to-market ratio. The authors conclude that the market underreacts to repurchase announcements, and that the long-term performance of firms repurchasing their shares is significantly better than that of a control group. The study provides evidence that managers may have accurate information about the value of their stocks and that the market may not fully incorporate this information in the short term. The results suggest that share repurchases can be a valuable signal to the market, and that the long-term performance of firms repurchasing their shares is significantly better than that of a control group.This paper examines the market reaction to open market share repurchase announcements between 1980 and 1990. The authors find that the average abnormal four-year buy-and-hold return following such announcements is 12.1 percent. For "value" stocks, where undervaluation is more likely, the average abnormal return is 45.3 percent, suggesting that the market initially underreacts to these announcements. In contrast, for "glamour" stocks, where undervaluation is less likely, no positive drift in abnormal returns is observed. The authors hypothesize that the market treats repurchase announcements with skepticism, leading to a slow adjustment in prices over time. They refer to this as the Underreaction Hypothesis. The study also finds that long-term performance following repurchase announcements is significantly higher than that of a control portfolio, with value stocks showing the most substantial abnormal returns. The authors conclude that the market underreacts to repurchase announcements, and that the long-term performance of firms repurchasing their shares is significantly better than that of a control group. The findings are robust to various tests, including those involving takeovers, performance measurement, and multiple announcements. The study provides evidence that managers may have accurate information about the value of their stocks and that the market may not fully incorporate this information in the short term. The results suggest that share repurchases can be a valuable signal to the market, and that the long-term performance of firms repurchasing their shares is significantly better than that of a control group. The study also finds that the market reaction to repurchase announcements is similar across all book-to-market groups, suggesting that the initial market reaction is not strongly influenced by the firm's book-to-market ratio. The authors conclude that the market underreacts to repurchase announcements, and that the long-term performance of firms repurchasing their shares is significantly better than that of a control group. The study provides evidence that managers may have accurate information about the value of their stocks and that the market may not fully incorporate this information in the short term. The results suggest that share repurchases can be a valuable signal to the market, and that the long-term performance of firms repurchasing their shares is significantly better than that of a control group.