The new issues puzzle

Article Abstract:

Companies issuing stock during 1970 to 1990, whether an initial public offering or a seasoned equity offering, have been poor long-run investments for investors. During the five years after the issue, investors have received average returns of only 5 percent per year for companies going public and only 7 percent per year for companies conducting a seasoned equity offer. Book-to-market effects account for only a modest portion of the low returns. An investor would have had to invest 44 percent more money in the issuers than in nonissuers of the same size to have the same wealth five years after the offering date. (Reprinted by permission of the publisher.)

Going public (Securities), Initial public offerings, Return on investment, Rate of return

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Portfolio rebalancing and the turn-of-the-year effect

Article Abstract:

This paper finds that, for the 1935 - 1986 period, the market's risk-return relation does not have a January seasonal. The findings differ from those of other studies due to the use of value-weighted, rather than equally weighted, portfolios. Inferences are sensitive to the weighting procedure because of the small-firm return patterns in January. In particular, even in those Januaries for which the market return is negative, small-firm returns are positive, and they are more positive the higher is beta. This is consistent with the portfolio rebalancing explanation of the turn-of-the-year effect. (Reprinted by permission of the publisher.)

Portfolio management, Risk (Economics)

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The buying and selling behavior of individual investors at the turn of the year

Article Abstract:

The average returns on low-capitalization stocks are unusually high relative to those on large-capitalization stocks in early January, a phenomenon known as the turn-of-the-year effect. This paper finds that the ratio of stock purchases to sales by individual investors displays a seasonal pattern, with individuals having a below-normal buy-sell ratio in late December and an above-normal ratio in early January. Year-to-year variation in the early January buy-sell ratio explains forty-six percent of the year-to-year variation in the turn-of-the-year effect during 1971-1985. (Reprinted by permission of the publisher.)

Investors, Seasonal variations (Economics)

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