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INFORMATIONAL VERSUS PRICE‐PRESSURE EFFECTS: EVIDENCE FROM SECONDARY OFFERINGS
Author(s) -
Hudson Carl D.,
Jensen Marlin R. H.,
Pugh William N.
Publication year - 1993
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1993.tb00140.x
Subject(s) - monetary economics , economics , ask price , business , financial economics , finance
The negative market reaction to secondary offerings is the likely result of informational or price‐pressure effects. We find a more negative announcement‐period reaction for larger offerings, which supports both explanations. However, we also find a more negative issuance‐day reaction for larger offers. Unless issuance reveals new information, this finding can only be associated with price‐pressure effects. After issuance, we observe a price recovery directly related to the relative size of the offer, which additionally supports the price‐pressure hypothesis.