Dahlquist, Magnus () (Swedish Institute for Financial Research) de Jong, Frank () (University of Amsterdam)
Abstract
The average firm going public or issuing new equity has underperformed the market in the long run. Endogeneity of the number of new issues has been proposed as a potential explanation of this long-run underperformance. Under pseudo market timing of new issues, ex post measures of average abnormal returns may be negative on average despite zero ex ante abnormal returns. We show that, under reasonable stationarity assumptions on the process generating events, traditional measures of average abnormal returns are consistent, and the pseudo market timing effect is a small sample problem. In simulations of an empirical model we demonstrate that the bias is small even in moderate sample sizes. An abnormal return measure capturing a feasible investment strategy is not biased. We argue that it is unlikely that pseudo market timing is the explanation for the long-run underperformance in equity issuances.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Institute for Financial Research in its series SIFR Research Report Series with number
24.
Length: 38 pages Date of creation: 01 Jun 2004 Date of revision: Handle: RePEc:hhs:sifrwp:0024
Contact details of provider: Postal: Institute for Financial Research Drottninggatan 89, SE-113 60 Stockholm, Sweden Phone: +46-8-728-5120 Fax: +46-8-728-5130 Email: Web page: http://www.sifr.org/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Anki Helmer).
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Loughran, Tim & Ritter, Jay R, 1995.
" The New Issues Puzzle,"
Journal of Finance,
American Finance Association, vol. 50(1), pages 23-51, March.
[Downloadable!] (restricted)
Hall, Bronwyn H & Griliches, Zvi & Hausman, Jerry A, 1986.
"Patents and R and D: Is There a Lag?,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 265-83, June.
[Downloadable!] (restricted)
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)