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Liquidity, Volatility and Stock Price Adjustment: Evidence from Seasoned Equity Offerings in an Emerging Market

Author

Listed:
  • Chia-Cheng Ho

    (Department of Finance, National Chung Cheng University, Chia-Yi, 621, Taiwan, R.O.C.)

  • Chin-Chuan Lee

    (Department of Finance, National Chung Cheng University, Chia-Yi, 621, Taiwan, R.O.C.)

  • Chien-Ting Lin

    (International Graduate School of Management, Division of Business, University of South Australia, City West Campus, Adelaide SA 5000, Australia)

  • C. Edward Wang

    (Department of Finance, National Chung Cheng University, Chia-Yi, 621, Taiwan, R.O.C.)

Abstract

Using data from the Taiwanese stock market, an emerging market, this paper documents positive changes in liquidity and volatility around seasoned equity offerings (SEOs). These findings are consistent with the uncertain signal hypothesis that investors with diverse views on the information content of SEOs are likely to induce larger trading activity and subsequent higher stock return volatility. We also provide direct evidence that changes in liquidity is positively associated with stock price adjustment. However, the relations among liquidity, volatility and price movements appear to rely on how SEOs are conducted. A practical implication is that managers may influence liquidity and stock price movement through their choice of SEOs issuing methods.

Suggested Citation

  • Chia-Cheng Ho & Chin-Chuan Lee & Chien-Ting Lin & C. Edward Wang, 2005. "Liquidity, Volatility and Stock Price Adjustment: Evidence from Seasoned Equity Offerings in an Emerging Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 31-51.
    • Handle: RePEc:wsi:rpbfmp:v:08:y:2005:i:01:n:s0219091505000336
    DOI: 10.1142/S0219091505000336
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    Citations

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    Cited by:

    1. 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).
    2. Javier Vidal-García & Marta Vidal & Duc Khuong Nguyen, 2016. "Do liquidity and idiosyncratic risk matter? Evidence from the European mutual fund market," Review of Quantitative Finance and Accounting, Springer, vol. 47(2), pages 213-247, August.
    3. Mohammad Alomari & David. M. Power & Nongnuch Tantisantiwong, 2018. "Determinants of equity return correlations: a case study of the Amman Stock Exchange," Review of Quantitative Finance and Accounting, Springer, vol. 50(1), pages 33-66, January.
    4. Yi‐Mien Lin & Shwu‐Jen You & Fung‐Jiao Lin, 2008. "The Effects of Pre‐issue Information Releases on Seasoned Equity Offerings," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(9‐10), pages 1138-1163, November.

    More about this item

    Keywords

    Liquidity; volatility; seasoned equity offerings; stock price adjustment; Taiwanese stock market;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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