Paper Title
Stock Repurchase and Real Option

Abstract
This paper takes real option approach to model how companies consider exercising share repurchase when stock price are undervalued. Companies in deciding whether to execute the stock repurchase, there are many considerations, so there were many factors to explore the implementation of the hypothesis and there are many Share Repurchases Hypothesis. Signal Theory is one of the most discussed and widely studied. The researches of Dann (1981), Vermaelen (1981), Asquith and Mullins (1986) and Comment and Jarrell (1991) support the signal theory while Grullon (2004)’s against the signal theory. Most verifications use abnormal return. However, in this paper I want to verify the motivation, not reactions about share repurchase. Therefore, I take real option approach to model how companies consider exercising share repurchase. Then the model’s parameter is verified. If parameter’s direction consistent with market direction. It supposed to be a successful evidence for the Signal Theory. Index Terms - Stock Repurchase, Real Option, Signal Theory.