Brazilian Market Reaction to Equity Issue Announcements
We have carried out an event study to investigate stock returns associated with the announcement of equity issues by Brazilian firms between 1992 and 2003 in order to determine market reaction before, during, and after the issue announcement. After measuring abnormal returns by OLS, we used ARCH and...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD)
2005-07-01
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| Series: | BAR: Brazilian Administration Review |
| Subjects: | |
| Online Access: | http://www.anpad.org.br/periodicos/arq_pdf/a_607.pdf |
| _version_ | 1797968284894625792 |
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| author | Otavio Ribeiro de Medeiros Alberto Shigueru Matsumoto |
| author_facet | Otavio Ribeiro de Medeiros Alberto Shigueru Matsumoto |
| author_sort | Otavio Ribeiro de Medeiros |
| collection | DOAJ |
| description | We have carried out an event study to investigate stock returns associated with the announcement of equity issues by Brazilian firms between 1992 and 2003 in order to determine market reaction before, during, and after the issue announcement. After measuring abnormal returns by OLS, we used ARCH and GARCH models over 70% of the sample. Our results are remarkably consistent with most of the international empirical literature. Some previous empirical findings have turned up abnormal returns before the announcement date, interpreted as signs of insider information. This evidence also appears in our study as we found an average cumulative abnormal return of –0.01 three weeks before the announcement. With respect to the announcement date, the evidence reported in the literature is virtually unanimous in showing negative abnormal returns, meaning that stock issues convey pessimistic information to the market. Our study confirms these findings with an average – 0.03 cumulative abnormal return on the first three days following the announcement. Finally, the empirical literature has also collected evidence of long-term negative abnormal returns after the issues, which we alsoconfirm, with an abnormal return of –0.28 after one year following the announcement. The results also show that ARCH/GARCH estimation of abnormal returns is superior to OLS estimation. |
| first_indexed | 2024-04-11T02:44:28Z |
| format | Article |
| id | doaj.art-78293feb845d491cbd60fd1ebf33a260 |
| institution | Directory Open Access Journal |
| issn | 1807-7692 |
| language | English |
| last_indexed | 2024-04-11T02:44:28Z |
| publishDate | 2005-07-01 |
| publisher | Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD) |
| record_format | Article |
| series | BAR: Brazilian Administration Review |
| spelling | doaj.art-78293feb845d491cbd60fd1ebf33a2602023-01-02T18:17:28ZengAssociação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD)BAR: Brazilian Administration Review1807-76922005-07-01223546Brazilian Market Reaction to Equity Issue AnnouncementsOtavio Ribeiro de MedeirosAlberto Shigueru MatsumotoWe have carried out an event study to investigate stock returns associated with the announcement of equity issues by Brazilian firms between 1992 and 2003 in order to determine market reaction before, during, and after the issue announcement. After measuring abnormal returns by OLS, we used ARCH and GARCH models over 70% of the sample. Our results are remarkably consistent with most of the international empirical literature. Some previous empirical findings have turned up abnormal returns before the announcement date, interpreted as signs of insider information. This evidence also appears in our study as we found an average cumulative abnormal return of –0.01 three weeks before the announcement. With respect to the announcement date, the evidence reported in the literature is virtually unanimous in showing negative abnormal returns, meaning that stock issues convey pessimistic information to the market. Our study confirms these findings with an average – 0.03 cumulative abnormal return on the first three days following the announcement. Finally, the empirical literature has also collected evidence of long-term negative abnormal returns after the issues, which we alsoconfirm, with an abnormal return of –0.28 after one year following the announcement. The results also show that ARCH/GARCH estimation of abnormal returns is superior to OLS estimation.http://www.anpad.org.br/periodicos/arq_pdf/a_607.pdfBrazilian stock marketSEOsevent studymarket volatilityGARCH. |
| spellingShingle | Otavio Ribeiro de Medeiros Alberto Shigueru Matsumoto Brazilian Market Reaction to Equity Issue Announcements BAR: Brazilian Administration Review Brazilian stock market SEOs event study market volatility GARCH. |
| title | Brazilian Market Reaction to Equity Issue Announcements |
| title_full | Brazilian Market Reaction to Equity Issue Announcements |
| title_fullStr | Brazilian Market Reaction to Equity Issue Announcements |
| title_full_unstemmed | Brazilian Market Reaction to Equity Issue Announcements |
| title_short | Brazilian Market Reaction to Equity Issue Announcements |
| title_sort | brazilian market reaction to equity issue announcements |
| topic | Brazilian stock market SEOs event study market volatility GARCH. |
| url | http://www.anpad.org.br/periodicos/arq_pdf/a_607.pdf |
| work_keys_str_mv | AT otavioribeirodemedeiros brazilianmarketreactiontoequityissueannouncements AT albertoshiguerumatsumoto brazilianmarketreactiontoequityissueannouncements |