How Much Does Investor Sentiment Really Matter for Equity Issuance Activity?
HEC Paris - Finance Department
York University - Schulich School of Business
August 20, 2008
We study the extent to which investor sentiment matters for aggregate equity issuance activity. We focus on firms that are susceptible to investor sentiment and for which accurate measures of economic fundamentals are available. While sentiment on its own matters for equity issuance, it matters relatively little once we control for accurately measured fundamentals. Collectively, proxies for sentiment explain roughly 10 percentage points of the time-series variation of equity issuance beyond the roughly 40 percent explained by fundamentals. We conclude that investor sentiment does not seem to matter very much for aggregate equity issuance activity.
Number of Pages in PDF File: 37
Keywords: Initial public offerings, hot issue markets, fundamentals, investor sentiment
JEL Classification: G32
Date posted: May 19, 2006 ; Last revised: March 9, 2013