Wealth Gains from Tracking Stocks: Long-Run Performance and Ex-Date Returns

24 Pages Posted: 20 Aug 2004

See all articles by Matthew J. Clayton

Matthew J. Clayton

University of Virginia - McIntire School of Commerce

Yiming Qian

University of Connecticut

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Abstract

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.

Suggested Citation

Clayton, Matthew J. and Qian, Yiming, Wealth Gains from Tracking Stocks: Long-Run Performance and Ex-Date Returns. Financial Management, Vol. 33, No. 3, 2004. Available at SSRN: https://ssrn.com/abstract=578624

Matthew J. Clayton (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-243-4043 (Phone)
434-924-7074 (Fax)

Yiming Qian

University of Connecticut ( email )

2100 Hillside Road U-1041F, Room 452
Storrs, CT 06269
United States
860-486-2774 (Phone)

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