Wealth Gains from Tracking Stocks: Long-Run Performance and Ex-Date Returns
Matthew J. Clayton
University of Virginia - McIntire School of Commerce
University of Iowa - Department of Finance
Financial Management, Vol. 33, No. 3, 2004
We examine the long-run performance of the tracking stocks, the parent stocks, and the combined companies following the issue of tracking stock, as well as the performance of the firms prior to the tracking stock issue. Our results indicate that the long-run performance is not significantly different from benchmark portfolio returns. Investigation of the ex-date returns for firms issuing tracking stocks reveals a significant mean ex-date abnormal return of 3.12 percentage points. The results suggest that the wealth gains due to the announcement effect are permanent, and they underestimate the total wealth gains from the tracking stock issues.
Number of Pages in PDF File: 24Accepted Paper Series
Date posted: August 20, 2004
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