Returns on Initial Public Offerings of Closed-End Funds

Peavy, John W.

doi:10.1093/rfs/3.4.695

Cited by 118 publications

(53 citation statements)

References 13 publications

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“…Similarly, Weiss (1989), Peavey (1990), andWang et al (1992) have found that new issues of closed-end funds and REITS are overpriced, unlike other initial public offerings; and that, compared with other initial public offerings, they offer higher underwriting selling fees and have substantially greater individual investor participation. Finally, we observe that investors purchase mutual funds with load fees when they could purchase no-load funds.…”

Section: Empirical Evidence On Individual Investment Decision Makingmentioning

confidence: 99%

Individual Decision Making and Investor Welfare

Brennan

Torous

1999

Economic Notes

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This article analyses and quantifies the costs of suboptimal decision making for an investor with a multi‐period horizon. In light of the empirical evidence that investors are too conservative and hold portfolios that are insufficiently diversified, we evaluate the costs of suboptimal equity participation both analytically and using simulation, and also estimate the costs of suboptimal diversification using simulation. We find that suboptimal leverage imposes only modest costs on the investor for reasonable parameter values. While the costs of inadequate diversification can be very high, we find that, because of the higher returns on small firms, an equally weighted portfolio of as few as five randomly chosen firms can provide the same level of expected utility as the value weighted market portfolio. (J.E.L.: G11, G18, G23).

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Section: Empirical Evidence On Individual Investment Decision Makingmentioning

confidence: 99%

Individual Decision Making and Investor Welfare

Brennan

Torous

1999

Economic Notes

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“…Weiss (1989) examines fund IPOs and finds that issuing funds underperform issuing industrial firms in the aftermarket. Weiss (1989) and Peavy (1990) show that foreign equity funds have stronger performance than domestic equity funds in the first several months following IPOs. Although some evidence on price performance of funds following IPOs exists, no study examines the performance of funds following the announcement of SEOs.…”

Section: Introductionmentioning

confidence: 99%

An Analysis of Closed‐end Fund Seasoned Equity Offerings

Higgins

Howton

2003

J of Financial Research

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We examine the stock price reaction to seasoned equity offerings (SEOs) of closed-end funds and the determinants of the issuance decision. We find that sample funds have negative and significant average announcement-day returns that are less than the returns associated with industrial firm SEOs, most likely because funds have fewer information asymmetries. Issuing funds have higher pre-issue returns, higher premiums, lower betas, and lower three-year, post-issue returns than nonissuing funds. The results of the study are consistent with the argument that fund managers time issues to take advantage of mean reversion in fund returns. 2003 The Southern Finance Association and the Southwestern Finance Association.

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“…The magnitude of returns by size do not provide any indication that smaller offers are subject to greater underpricing and so there is no supporting evidence for Ritter [55], Chalk and Peavy [56], Ritter [8] and Ibbotson et. al.…”

Section: Determinants Of Long Run Performancementioning

confidence: 96%