Review of Financial Studies Vol. 21 No. 6 2008
The New Issues Puzzle: Testing the Investment-Based Explanation
Abstract
[An investment factor, long in low-investment stocks and short in high-investment stocks, helps explain the new issues puzzle. Adding the investment factor into standard factor regressions reduces the SEO underperformance by about 75%, the IPO underperformance by 80%, the underperformance following convertible debt offerings by 50%, and Daniel and Titman's (2006) composite issuance effect by 40%. The reason is that issuers invest more than nonissuers, and the investment factor earns a significantly positive average return of 0.57% per month.]
- Volume
- 21
- Issue
- 6
- Pages
- 2825-2855
- Sources
- bibtex:phds-export.bib