Investment-Based Underperformance Following Seasoned Equity Offerings

Evgeny Lyandres, Le Sun and Lu Zhang ()

No 11459, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Adding a return factor based on capital investment into standard, calendar-time factor regressions makes underperformance following seasoned equity offerings largely insignificant and reduces its magnitude by 37-46%. The reason is that issuers invest more than nonissuers matched on size and book-to-market. Moreover, the low-minus-high investment-to-asset factor earns a significant average return of 0.37% per month. Our evidence suggests that the underperformance results from the negative investment-expected return relation, as predicted by Carlson, Fisher, and Giammarino (2005).

JEL-codes: E22 E44 G12 G14 G24 G31 G32 (search for similar items in EconPapers)
Date: 2005-07
New Economics Papers: this item is included in nep-fin and nep-mac
Note: AP
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Citations: View citations in EconPapers (5)

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