Heterogeneous beliefs and return volatility around seasoned equity offerings

Ann Marie Hibbert, Qiang Kang, Alok Kumar and Suchi Mishra

Journal of Financial Economics, 2020, vol. 137, issue 2, 571-589

Abstract: We investigate the dynamics of heterogeneous beliefs and link them to the volatility pattern throughout the seasoned equity offering (SEO) event window. In sync with a reduction in information asymmetry related to management information releases around the SEO event, belief heterogeneity declines. Moreover, heterogeneity in beliefs, proxied by either analyst- or institutional-trade-based measures, is a robust and salient determinant of SEO firm volatility, which provides an explanation for the volatility timing “puzzle” identified in the SEO market. Furthermore, the relation between heterogeneous beliefs and return volatility weakens as short sale constraints tighten, suggesting a potential causal link.

Keywords: Return volatility; SEOs; Analyst forecast dispersion; Trade-based heterogeneity in beliefs; Short selling (search for similar items in EconPapers)
JEL-codes: D82 G12 G14 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:137:y:2020:i:2:p:571-589

DOI: 10.1016/j.jfineco.2020.03.003

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