Market Timing or Pseudo-Market Timing: An International Examination

Abstract:     
We provide and implement an alternative regression model based on the Granger causality test, to test the market timing and pseudo-market timing hypotheses with international data. The model takes into account the equity issues' possible feedback to past market returns and examines whether timing is based on information asymmetry. We find evidence of the market timing of equity issues in developed, common law, opaque, less corrupt, and strong property rights markets, but little evidence in less developed, civil law, transparent, more corrupt, and weak property rights markets, suggesting that market timing exists and that it is due to information asymmetry.

Keywords: equity issues, market timing, information asymmetry, international evidence

JEL Classifications: C53, G14, G15, G32

Working Paper Series