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DISPOSITION EFFECT AND PUBLIC SECONDARY EQUITY OFFERINGS
Author(s) -
Marciukaityte Dalia,
Szewczyk Samuel H.
Publication year - 2012
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.1475-6803.2011.01309.x
Subject(s) - disposition , disposition effect , shareholder , equity (law) , business , proxy (statistics) , secondary market , monetary economics , initial public offering , share price , economics , financial economics , finance , corporate governance , psychology , social psychology , paleontology , context (archaeology) , machine learning , political science , computer science , stock exchange , law , biology
Shareholders selling shares in public pure‐secondary equity offerings are affected by the disposition effect and tend to sell past winners. Selling shares in these offerings is associated with significant indirect offer costs. On average, shares are offered at a 5.5% discount from the market price. Moreover, shares of offering firms are about 8% underpriced. Offer discounts and underpricing are positively related to the proxy for the disposition effect. Our findings are consistent with the proposition that the disposition effect increases the supply of winning stocks and depresses their prices.