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Abnormal volatility in seasoned equity offerings during economic disruptions

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  • Prasad, Mason
  • Bakry, Walid
  • Varua, Maria Estela

Abstract

Australia has become one of most prolific issuers of seasoned equity offerings (SEOs) globally. Due to its convenience, firms issue SEOs as their primary capital raising mechanism particularly during economic disruptions i.e., the early 2000s dot-com bubble, 2008 Global Financial Crisis and COVID-19. Using an event study for ASX 200 firms from 1998 to 2020, we show that there is an increased intensity of SEO abnormal return volatility and volume during economic disruptions. We find evidence of abnormal return volatility and volume in standalone and restricted SEOs being higher relative to combined SEOs. We also identify that higher performing sectors experience larger abnormal return volatility and volume. Finally, using an improved measure of abnormal return volatility, we capture the time varying nature of volatility using GARCH and GJR-GARCH estimations. We highlight that the traditional abnormal return volatility measure tends to be overstated for some SEO types and understated for others.

Suggested Citation

  • Prasad, Mason & Bakry, Walid & Varua, Maria Estela, 2021. "Abnormal volatility in seasoned equity offerings during economic disruptions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    • Handle: RePEc:eee:beexfi:v:30:y:2021:i:c:s2214635021000538
    DOI: 10.1016/j.jbef.2021.100509
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    More about this item

    Keywords

    Seasoned equity offering; Abnormal return volatility; Abnormal trading volume; GARCH; Event study; ASX;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G01 - Financial Economics - - General - - - Financial Crises

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