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Risk and Return on Newly Listed Stocks: The Post-Listing Experience

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  • Bhandari, Arvind
  • et al

Abstract

Researchers consistently find that newly listed stocks underperform in the post-listing period. It has been suggested that this anomalous finding may, in part, be explained away if the risk during this period is lower than at other times. Evidence is presented here that the riskiness of newly listed stocks undergoes a seasoning process. Instead of lower risk, riskiness is found to be greater immediately after listing than in later periods. This suggests that the post-listing anomaly is actually worse than has been previously recognized.

Suggested Citation

  • Bhandari, Arvind & et al, 1989. "Risk and Return on Newly Listed Stocks: The Post-Listing Experience," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 12(2), pages 93-102, Summer.
  • Handle: RePEc:bla:jfnres:v:12:y:1989:i:2:p:93-102
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    References listed on IDEAS

    as
    1. Lindvall, John R, 1977. "New Issue Corporate Bonds, Seasoned Market Efficiency and Yield Spreads," Journal of Finance, American Finance Association, vol. 32(4), pages 1057-1067, September.
    2. McConnell, John J & Sanger, Gary C, 1987. " The Puzzle in Post-listing Common Stock Returns," Journal of Finance, American Finance Association, vol. 42(1), pages 119-140, March.
    3. G. Maxwell Ule, 1937. "Price Movements of Newly Listed Common Stocks," The Journal of Business, University of Chicago Press, vol. 10, pages 346-346.
    4. Reints, William W. & Vandenberg, Pieter A., 1975. "The Impact of Changes in Trading Location on a Security's Systematic Risk," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 10(05), pages 881-890, December.
    5. Sanger, Gary C. & McConnell, John J., 1986. "Stock Exchange Listings, Firm Value, and Security Market Efficiency: The Impact of NASDAQ," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(01), pages 1-25, March.
    6. Theoharry Grammatikos & George Papaioannou, 1986. "Market Reaction To Nyse Listings: Tests Of The Marketability Gains Hypothesis," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 9(3), pages 215-227, September.
    7. Weinstein, Mark I, 1978. "The Seasoning Process of New Corporate Bond Issues," Journal of Finance, American Finance Association, vol. 33(5), pages 1343-1354, December.
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    Cited by:

    1. McConnell, John J. & Dybevik, Heidi J. & Haushalter, David & Lie, Erik, 1996. "A survey of evidence on domestic and international stock exchange listings with implications for markets and managers," Pacific-Basin Finance Journal, Elsevier, vol. 4(4), pages 347-376, December.
    2. Walayet A. Khan & H. Kent Baker, 1993. "Unlisted Trading Privileges, Liquidity, And Stock Returns," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 16(3), pages 221-236, September.
    3. David Abad & Antonio Rubia, 1999. "- Evaluation Of The Fixing Trading System In The Spanish Market," Working Papers. Serie EC 1999-17, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. H. Kent Baker & Richard B. Edelman, 1990. "Otc Market Switching And Stock Returns: Some Empirical Evidence," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 13(4), pages 325-338, December.
    5. Sun, Qian & Tang, Yuen-Kin & Tong, Wilson H. S., 2002. "The impacts of mass delisting: Evidence from Singapore and Malaysia," Pacific-Basin Finance Journal, Elsevier, vol. 10(3), pages 333-351, June.

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