NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Evgeny Lyandres

Boston University
School of Management
595 Commonwealth Avenue
Boston, MA 02215

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NBER Working Papers and Publications

July 2005Investment-Based Underperformance Following Seasoned Equity Offerings
with Le Sun, Lu Zhang: w11459
Adding a return factor based on capital investment into standard, calendar-time factor regressions makes underperformance following seasoned equity offerings largely insignificant and reduces its magnitude by 37-46%. The reason is that issuers invest more than nonissuers matched on size and book-to-market. Moreover, the low-minus-high investment-to-asset factor earns a significant average return of 0.37% per month. Our evidence suggests that the underperformance results from the negative investment-expected return relation, as predicted by Carlson, Fisher, and Giammarino (2005).
 
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