Order Flow Patterns around Seasoned Equity Offerings and their Implications for Stock Price Movements*

Sahn‐wook Huh and Avanidhar Subrahmanyam

International Review of Finance, 2005, vol. 5, issue 1‐2, 75-111

Abstract: In this study, we employ order imbalance measures to provide evidence that there is cross‐sectional heterogeneity in investor reactions to seasoned equity offerings (SEOs). The normally positive relation between imbalances and returns disappears for trade number imbalances but remains intact for dollar imbalances following SEOs. The return‐imbalance delinkage is most pronounced for SEO stocks in which institutions (non‐institutions) are net sellers (buyers). We also find that the SEO portfolio in which large institutional investors are net sellers strongly underperforms the complementary portfolio in which they are net buyers.

Date: 2005
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