firms compared to traditional firms because they expect DT firm managers to take corrective action. Consistent with these predictions, we find that the capital expenditures of DT firms are more sensitive to negative information reflected in stock prices, and their negative earnings are less persistent than those of traditional firms. Additionally, we find that analysts’ forecast revisions for DT firms are less responsive to negative earnings news than those for traditional firms. Our findings demonstrate that managers of DT firms exhibit strong-er feedback effects than traditional firms, indicating that they learn more from the negative information embedded in stock prices. Furthermore, analysts are more forgiving
We examine feedback effects in disruptive technology (DT) firms. We predict DT firms respond more to negative market feedback We predict sophisticated investors anticipate this behavior. DT firms’ capital expenditures react more to negative stock news. Analysts revise forecases less for negative earnings news of DT firms. of DT firms’ negative news, anticipating that managers are likely to adjust their investment and operational decisions to address and reverse their negative situation. Both RDOs and CMPOs allow firms to swiftly issue equity after confidential marketing. While RDOs are restricted to accredited investors, CMPOs can also reach retail investors. Firms with low risk and low information asymmetry prefer CMPOs over RDOs. CMPOs tend to involve more intermediaries and reach more institutional investors than RDOs. The two types of offerings are followed by similarly low long-run abnormal stock returns. successfully time the market than RDOs. Finally, we provide some evidence that post-offer stock performance is related to investor type.
Do You Believe in Second Chances? Marcus Caylor, Duanping Hong, Hyungshin Park, Hong Qu P
Coles Working Paper Series, SPRING25-07, April 2025
We study the feedback effect in disruptive technology (DT) firms. DT firms are typically young, high-growth companies. Since these firms often lack established product markets and customer bases, we predict that DT firm managers are more likely to adjust their investment decisions in response to negative market feedback. Consequently, the negative performance of DT firms is less likely to persist. We also predict that sophisticated market participants, such as financial analysts, will react less strongly to negative news from DT
Composite Quantile Regression for Alpha Estimation Coles Working Paper Series, FALL24-03, November 2024 Zhaoguo Zhan
Evaluation of asset pricing models is largely based on the alphas (intercepts) in the linear regression of excess asset returns on risk factors. When regression errors are not normally distributed, the least squares estimator for alphas is inefficient, which further
leads to less powerful testing of alphas by the Gibbons, Ross, and Shanken (1989, GRS) test. We use the composite quantile regression to estimate alphas, and show that it provides more accurate alpha estimates under a variety of non- normal distributions. A joint test
of alphas using composite quantile regression is also developed, which can reject zero alphas in spanning tests when the GRS test does not.
P
Among equity offerings (SEOs), also known as follow-on offerings, confidentially mar-keted seasoned public offerings (CMPOs) have become increasingly popular in the U.S., with the proceeds increasing from just over $0.5 billion in 2008 to over $10 billion in 2021. Registered direct offer-ings (RDOs) also permit confidential marketing of registered securities. Both RDOs and CMPOs allow firms to swiftly raise equity capital, typically concluding by the third trading day following the announcement. While RDOs exclusively target accredited investors, CMPOs are accessible to both accredited and retail investors. We identify two key factors influencing the choice between RDOs and CMPOs. First, issuers with low risk and low information asymmetry prefer CMPOs. Second, CMPOs tend to involve more investment banks and reach more
Registered Direct Offerings and Confidentially Marketed Public Offerings Rongbing Huang, Hong Qian P institutional investors than RDOs. There is also some evidence that a regulation requiring shareholder approval for a large private offering might discourage the use of RDOs.
The least squares estimator for regression coefficients can be inefficient. The composite quantile regression estimator can outperform least squares. A test based on composite quantile regression is developed.
Coles Working Paper Series, FALL24-04, November 2024
On average, both types of equity offerings are followed by low long-run abnormal returns, but participating investors can potentially earn positive abnormal returns by selling their offered shares early. CMPOs are not followed by lower average returns than RDOs, suggesting that the popularity of CMPOs is not because they allow issuers to more
Coles Research Magazine | Working Paper Series
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