Pseudo Market Timing and the Long-Run Underperformance of IPOs
Numerous studies document long-run underperformance by firms following equity offerings. This paper shows that underperformance is very likely to be observed ex-post in an efficient market. The premise is that more firms issue equity at higher stock prices even though they cannot predict future retu...
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| Veröffentlicht in: | The Journal of finance (New York) 2003-04, Vol.58 (2), p.483-517 |
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| container_title | The Journal of finance (New York) |
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| creator | Schultz, Paul |
| description | Numerous studies document long-run underperformance by firms following equity offerings. This paper shows that underperformance is very likely to be observed ex-post in an efficient market. The premise is that more firms issue equity at higher stock prices even though they cannot predict future returns. Ex-post, issuers seem to time the market because offerings cluster at market peaks. Simulations based on 1973 through 1997 data reveal that when ex-ante expected abnormal returns are zero, median ex-post underperformance for equity issuers will be significantly negative in event-time. Using calendar-time returns solves the problem. |
| doi_str_mv | 10.1111/1540-6261.00535 |
| format | Article |
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| language | eng |
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| source | Access via Wiley Online Library; Jstor Complete Legacy |
| subjects | Coefficients Efficient markets Equity Expected returns Financial economics Initial public offerings Market prices Mathematical models Rates of return Simulation Statistical analysis Statistical median Stock prices Studies Value weighted index |
| title | Pseudo Market Timing and the Long-Run Underperformance of IPOs |
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