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Drug approval decisions: A note on stock liquidity effects

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  • Himmelmann, Achim
  • Schiereck, Dirk
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    Abstract

    We 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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    File URL: http://www.sciencedirect.com/science/article/pii/S0927539812000400
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Empirical Finance.

    Volume (Year): 19 (2012)
    Issue (Month): 5 ()
    Pages: 640-652

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    Handle: RePEc:eee:empfin:v:19:y:2012:i:5:p:640-652

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    Web page: http://www.elsevier.com/locate/jempfin

    Related research

    Keywords: Product innovation; Abnormal stock return; Stock liquidity;

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