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Unformatted text preview: New-issue puzzle
Although new stock issues generally tend to be underpriced, the initial capital gain
often turns into losses over longer periods of e.g. 5 years.
Stocks generally tend to rise immediately after being added to an index (e.g. S&P 500,
where the index effect was originally documented)
Smallcap stocks have historically tended to rise on Fridays and fall on Mondays,
perhaps because sellers are afraid to hold short positions in risky stocks over the
weekend, so they buy back and re-initiate. While the existence of these anomalies is well accepted, the question of whether investors can exploit
them to earn superior returns in the future is subject to debate. Investors evaluating anomalies should keep
in mind that although they have existed historically, there is no guarantee they will persist in the future.
Moreover, there seem to be a tendency that anomalies disappear as soon as the academic papers
discovering them get published. 7.2 Behavioural finance
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This note was uploaded on 10/26/2012 for the course 19 19 taught by Professor - during the Spring '12 term at Sunway University College.
- Spring '12