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INVESTOR OVEROPTIMISM AND PRIVATE EQUITY PLACEMENTS
Author(s) -
Marciukaityte Dalia,
Szewczyk Samuel H.,
Varma Raj
Publication year - 2005
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.1475-6803.2005.00141.x
Subject(s) - equity (law) , private equity , private equity fund , sample (material) , business , argument (complex analysis) , private placement , stock (firearms) , stock market , monetary economics , private equity firm , economics , finance , mechanical engineering , paleontology , biochemistry , chemistry , investment banking , chromatography , political science , law , biology , engineering , horse
We reexamine investor tendency to overweight recent experiences when predicting future performance of firms by examining a sample of firms making private equity placements. Our findings are consistent with the projection argument that investors use the recent experiences of other firms to predict the success of placing firms. Specifically, we find that the placements preceded by a larger number of recently very successful firms are associated with the significantly more favorable market reaction to the placement announcement and significantly poorer post‐placement stock price performance.