Liquidity shocks and SEO underpricing
Dai, Kai (2012) Liquidity shocks and SEO underpricing. PhD thesis, University of Nottingham.
We hypothesise that certain market conditions could lead to liquidity shocks that will consequently increase SEO underpricing (defined as the close-to-offer return). We propose three scenarios of market conditions, namely aggregate issues with large volume, large market declines and market volatility. Using a sample of about 5,000 seasoned equity offerings from 1987 to 2009, we found that market volatility is significantly and positively related to SEO underpricing after controlling for other factors.
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