Abnormal Volatility in Seasoned Equity Offerings During Economic Disruptions

Prasad M., Bakry W., Varua M. E., 2021. Abnormal Volatility in Seasoned Equity Offerings During Economic Disruptions. Journal of Behavioral and Experimental Finance, 30,100509. https://authors.elsevier.com/a/1c%7Eve7tZBbkzzQ

Posted: 15 Apr 2021 Last revised: 12 Jun 2021

See all articles by Mason Prasad

Mason Prasad

Western Sydney University - School of Business

Walid Bakry

Western Sydney University

Maria Estela Varua

Western Sydney University

Date Written: August 1, 2020

Abstract

Australia has become one of most prolific issuers of seasoned equity offerings (SEOs) globally. Due to its convenience, firms issue SEOs as their primary capital raising mechanism particularly during economic disruptions i.e., the early 2000s dot-com bubble, 2008 Global Financial Crisis and COVID-19. Using an event study for ASX 200 firms from 1998 to 2020, we show that there is an increased intensity of SEO abnormal return volatility and volume during economic disruptions. We find evidence of abnormal return volatility and volume in standalone and restricted SEOs being higher relative to combined SEOs. We also identify that higher performing sectors experience larger abnormal return volatility and volume. Finally, using an improved measure of abnormal return volatility, we capture the time varying nature of volatility using GARCH and GJR-GARCH estimations. We highlight that the traditional abnormal return volatilitymeasure tends to be overstated for some SEO types and understated for others.

Keywords: Seasoned equity offering, abnormal return volatility, abnormal trading volume, GARCH, event study, ASX

JEL Classification: G12, G14, G17, G01

Suggested Citation

Prasad, Mason and Bakry, Walid and Varua, Maria Estela, Abnormal Volatility in Seasoned Equity Offerings During Economic Disruptions (August 1, 2020). Prasad M., Bakry W., Varua M. E., 2021. Abnormal Volatility in Seasoned Equity Offerings During Economic Disruptions. Journal of Behavioral and Experimental Finance, 30,100509. https://authors.elsevier.com/a/1c%7Eve7tZBbkzzQ, Available at SSRN: https://ssrn.com/abstract=3827066

Mason Prasad (Contact Author)

Western Sydney University - School of Business ( email )

Locked Bag 1797
Penrith, NSW 2751
Australia

Walid Bakry

Western Sydney University ( email )

Sydney
1 Parramatta Square, 169 Macquarie Street, Parrama
Sydney, 2751
Australia
2 9685 9372 (Phone)

Maria Estela Varua

Western Sydney University ( email )

PO Box 10
Kingswood, NSW 2747
Australia

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