Tests for Price Effects of New Issues of Seasoned Securities

  • Author(s): ALAN C. HESS, PETER A. FROST
  • Published: Apr 30, 2012
  • Pages: 11-25
  • DOI: 10.1111/j.1540-6261.1982.tb01092.x

ABSTRACT

Do new issues of seasoned securities cause significant price movements in the neighborhood of the issue day? This paper presents an empirical comparison of three competing hypotheses: the SEC view that a new issue causes a permanent price decline; the underwriter view that there is only a temporary price decline during the distribution period; and the efficient market hypothesis (EMH) that implies the absence of any price effects. Several empirical tests of the competing hypotheses using data on new issues of utility stocks traded on the NYSE reject the SEC and underwriter views in favor of the EMH.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version