Pseudo Market Timing and the Long-Run Underperformance of IPOs

  title={Pseudo Market Timing and the Long-Run Underperformance of IPOs},
  author={P. Schultz},
  journal={Journal of Finance},
  • P. Schultz
  • Published 2003
  • Economics
  • Journal of Finance
  • 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… CONTINUE READING
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