Drug approval decisions: A note on stock liquidity effects
AbstractWe analyze the relationship between positive stock returns, changes in trading activities, and liquidity improvements following drug approval announcements. Using a unique hand-collected data set on approval decisions in Europe, we find that stock liquidity does change. Stocks temporarily exhibit strong abnormal trading volume, lower spreads, and permanently become more liquid. Our results suggest that the initial positive wealth effect of a new drug release reflects both positive information content and liquidity improvements.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Empirical Finance.
Volume (Year): 19 (2012)
Issue (Month): 5 ()
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Web page: http://www.elsevier.com/locate/jempfin
Product innovation; Abnormal stock return; Stock liquidity;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
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