Business firms occasionally buy back their own stock for various reasons, sometimes when they view the market price as a bargain compared to their view of its true worth. It has been observed that the market price of stock often increases around the time of the announcement of such a buyback. Consider the data on actual percent changes over 3 months in stock prices for firms announcing stock buybacks shown in Table 3.8.2. The owners of these firms would probably have preferred to wait a few more months before buying back their stock, given that the crash of 1987 occurred just 1 month later, and the stock could have been bought at a lower price (although this knowledge in hindsight was not available at the time, and this is one aspect of the risk of the stock market). 

a. Construct a histogram of this data set. 

b. Based on this histogram, what can you say to summarize typical behavior of these stock prices following a buyback announcement? 

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TABLE 3.8.2 Market Response to Stock Buyback Announcements Three- Three- Month Price Month Price Company Change (%) Company Change (%) ITT Corp Tektronix 17.0 -7.5 Ohio Casualty General 12.7 13.9 Motors Kimberly-Clark Firestone 26.2 14.0 GAF Corp Anheuser-Busch 19.2 14.3 Rockwell Hewlett-Packard 10.2 -1.1 Intl. Source: Data from The Wall Street Journal, September 18, 1987, p. 17. Their source is Salomon Brothers.