Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/20118
Title: Price informativeness and stock return synchronicity : evidence from the pricing of seasoned equity offerings
Authors: Chan, K
Chan, YC
Keywords: Price informativeness
Seasoned equity offerings
Stock return synchronicity
Issue Date: 2014
Publisher: Elsevier
Source: Journal of financial economics, 2014, v. 114, no. 1, p. 36-53 How to cite?
Journal: Journal of financial economics 
Abstract: We investigate what stock return synchronicity reflects in terms of price informativeness by examining its effect on the pricing of seasoned equity offerings (SEOs). Based on 5,087 SEOs from 1984 to 2007, we find a significantly negative relation between stock return synchronicity (estimated as the logit transformation of the R-squared statistic from a two-factor regression) and SEO discounts (the percentage differences between pre-offer day closing prices and offer prices). The negative relation is strongest when there is no analyst coverage, and it declines as analyst coverage increases. This shows that stock price is more informative when stock return synchronicity is higher and also that information asymmetry can be mitigated by analyst coverage. We further decompose stock return synchronicity into the market comovement and industry comovement components and find that both components are equally important in affecting SEO discounts.
URI: http://hdl.handle.net/10397/20118
ISSN: 0304-405X
DOI: 10.1016/j.jfineco.2014.07.002
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