Investor Overoptimism and Private Equity Placements

Posted: 13 Dec 2004

See all articles by Dalia Marciukaityte

Dalia Marciukaityte

Louisiana Tech University - College of Administration & Business

Samuel H. Szewczyk

Drexel University - Department of Finance

Raj Varma

University of Delaware - Department of Finance

Abstract

We reexamine investor tendency to overweight recent experiences when predicting future performance of firms by examining a sample of firms making private equity placements. Our findings are consistent with the projection argument that investors use the recent experiences of other firms to predict the success of placing firms. Specifically, we find that the placements preceded by a larger number of recently very successful firms are associated with the significantly more favorable market reaction to the placement announcement and significantly poorer post-placement stock price performance.

Keywords: Overoptimism, private placement

JEL Classification: G14

Suggested Citation

Marciukaityte, Dalia and Szewczyk, Samuel H. and Varma, Raj, Investor Overoptimism and Private Equity Placements. Available at SSRN: https://ssrn.com/abstract=631207

Dalia Marciukaityte (Contact Author)

Louisiana Tech University - College of Administration & Business ( email )

P.O. Box 3178
Ruston, LA 71272
United States
318-280-7340 (Phone)
318-257-4253 (Fax)

Samuel H. Szewczyk

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215-895-1746 (Phone)

Raj Varma

University of Delaware - Department of Finance ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States
302-831-1786 (Phone)
302-831-3062 (Fax)

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