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How Much Does Investor Sentiment Really Matter for Equity Issuance Activity?

37 Pages Posted: 19 May 2006 Last revised: 9 Mar 2013

François Derrien

HEC Paris - Finance Department

Ambrus Kecskes

York University - Schulich School of Business

Date Written: August 20, 2008

Abstract

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.

Keywords: Initial public offerings, hot issue markets, fundamentals, investor sentiment

JEL Classification: G32

Suggested Citation

Derrien, François and Kecskes, Ambrus, How Much Does Investor Sentiment Really Matter for Equity Issuance Activity? (August 20, 2008). Available at SSRN: https://ssrn.com/abstract=903120 or http://dx.doi.org/10.2139/ssrn.903120

François Derrien (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
33 1 39 67 72 98 (Phone)

HOME PAGE: http://www.hec.fr/derrien

Ambrus Kecskes

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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