Propensity Score Matching and Abnormal Performance after Seasoned Equity Offerings

43 Pages Posted: 26 Nov 2003

See all articles by Xianghong Li

Xianghong Li

York University - Department of Economics

Xinlei Shelly Zhao

Government of the United States of America - Office of the Currency Comptroller - Risk Analysis Division

Date Written: October 2005

Abstract

The long-run underperformance of stocks after seasoned equity offerings (SEOs) is a major challenge to the efficient market hypothesis. We reexamine the SEO underperformance anomaly using the propensity score matching method on a sample of around 2000 offerings between 1986 and 1998. While underperformance characterizes equal-weight and buy-and-hold returns if traditional matching methods are used, the underperformance is economically and statistically insignificant when we match issuers to non-issuers by propensity scores. Our results suggest that SEO underperformance manifests statistical inadequacies of traditional matching methods rather than an anomaly challenging the efficient market hypothesis.

Keywords: Seasoned equity offering, long-run performance, propensity score matching

JEL Classification: G14

Suggested Citation

Li, Xianghong and Zhao, Xinlei, Propensity Score Matching and Abnormal Performance after Seasoned Equity Offerings (October 2005). AFA 2004 San Diego Meetings, Forthcoming. Available at SSRN: https://ssrn.com/abstract=451740 or http://dx.doi.org/10.2139/ssrn.451740

Xianghong Li

York University - Department of Economics ( email )

4700 Keele St.
Toronto, Ontario M3J 1P3
Canada

Xinlei Zhao (Contact Author)

Government of the United States of America - Office of the Currency Comptroller - Risk Analysis Division ( email )

250 E Street, SW
Washington, DC 20219
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
718
Abstract Views
3,672
rank
36,056
PlumX Metrics