Stock Liquidity and Issuing Activity
60 Pages Posted: 31 Aug 2015 Last revised: 11 Jan 2019
Date Written: January 9, 2019
The paper shows that issuing activity does not result in superior liquidity. Even the kinds of new issues that are supposed to be more liquid than others (IPOs backed by venture capital, new issues with high-prestige underwriters, severely underpriced IPOs) are just as liquid as their peer non-issuers or other similar issuing companies. The paper thus refutes the existing liquidity-based explanations of the new issues puzzle. The paper also shows that the low-minus-high turnover factor seems to explain the new issues puzzle and related anomalies only because it picks up volatility risk.
Keywords: new issues puzzle, liquidity, stock issuance, volatility risk
JEL Classification: G12, G13, G32, E44
Suggested Citation: Suggested Citation