Investor sentiment and stock price: Empirical evidence from Chinese SEOs

Yueqin Lan, Yong Huang and Chao Yan

Economic Modelling, 2021, vol. 94, issue C, 703-714

Abstract: We examine whether and how the market interacts with investor sentiment in the context of seasoned equity offerings (SEOs) by Chinese listed firms. We adopt the component of market index return, which cannot be explained by fundamental macro-economic factors as a proxy for the market-wide investor sentiment, and overnight stock returns proxying for the firm-specific sentiment. We find robust evidence that investor sentiment drives the pre-announcement abnormal return. In the post-announcement period, the market corrects the sentiment-driven overvaluation within about one month. These findings reinforce the view that market timers take advantage of investor sentiment to issue seasoned shares.

Keywords: Investor sentiment; Seasoned equity offering; Overvaluation (search for similar items in EconPapers)
JEL-codes: G14 G18 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:94:y:2021:i:c:p:703-714

DOI: 10.1016/j.econmod.2020.02.012

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