The authors investigate the importance of bid-ask spread-induced biases on event date returns as exemplified by seasoned equity offerings by NYSE listed firms. They document significant negative return biases on the offering day, which explain a large portion of the negative event date returns documented in the literature. Buy-sell order flow imbalance is prominent around the offering and induces a relatively large spread bias. If order imbalances are suspected, the researcher can use returns calculated from the midpoint of the closing bid and ask quotes instead of returns calculated from closing transaction prices to avoid this return bias.

This paper assesses the ability of financial statement variables to forecast sensitivities to systematic risk factors generated by a multifactor, macroeconomic forces model. Forecasts of beta derived from financial variables are shown to outperform naive, random walk forecasts, although Bayesian-adjusted betas perform as well as the financial variables model.

We investigate the importance of bid‐ask spread‐induced biases on event date returns as exemplified by seasoned equity offerings by NYSE listed firms. We document significant negative return biases on the offering day which explain a large portion of the negative event date return documented in the literature. Buy‐sell order flow imbalance is prominent around the offering and induces a relatively large spread bias. If order imbalances are suspected, the researcher can use returns calculated from the midpoint of the closing bid and ask quotes instead of returns calculated from closing transaction prices to avoid this return bias.

We investigate the importance of bid-ask spread-induced biases on event date returns as exemplified by seasoned equity offerings by NYSE listed firms. We document significant negative return biases on the offering day which explain a large portion of the negative event date return documented in the literature. Buy-sell order flow imbalance is prominent around the offering and induces a relatively large spread bias. If order imbalances are suspected, the researcher can use returns calculated from the midpoint of the closing bid and ask quotes instead of returns calculated from closing transaction prices to avoid this return bias.