Three Essays on the Long-Run Performance of New Issues and Extreme Performers
Loughran, Timothy James
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https://hdl.handle.net/2142/72587
Description
Title
Three Essays on the Long-Run Performance of New Issues and Extreme Performers
Author(s)
Loughran, Timothy James
Issue Date
1993
Doctoral Committee Chair(s)
Ritter, Jay R.
Department of Study
Finance
Discipline
Finance
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Finance
Abstract
This dissertation documents the poor long-run performance of new equity issues during 1970-90. The poor long-run performance of initial public offerings (IPOs) result in lower returns on NASDAQ than on the New York Stock Exchange. New equity issues appear to time their offerings to lower their equity cost of capital. I find that with an average timing ability, firms lower their cost of equity capital by 700 basis points for IPOs and 400 basis points for seasoned equity offerings. I also document that low-priced stocks are not solely responsible for the success of the contrarian strategy and that pooled cross-section time-series regressions should not be used in studies using stock returns as the dependent variable when one is attempting to discern cross-sectional patterns.
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