Order Flow Patterns around Seasoned Equity Offerings and their Implications for Stock Price Movements


  • *We appreciate the constructive and thoughtful comments of Bruce Grundy (the editor) and an anonymous referee. We also thank Antonio Bernardo, Mi-Ae Kim, Unyong Pyo, Rossen Valkanov, Neal Stoughton, and seminar participants at UCLA, Brock University, Singapore Management University, National University of Singapore, SKKU, KAIST, and the 2005 Northern Finance Association Meetings, for valuable feedback. We express special thanks to Xiao Chen of the UCLA Academic Technology Services for providing useful programming assistance. Huh gratefully acknowledges generous financial support from the Office of Research Services at Brock University. All errors are solely ours.

Sahn-Wook Huh
Faculty of Business
Brock University
St. Catharines
Canada L2S 3A1
Avanidhar Subrahmanyam
The Anderson School
110 Westwood Plaza
University of California at Los Angeles
Los Angeles
CA 90095-1481


In this study, we employ order imbalance measures to provide evidence that there is cross-sectional heterogeneity in investor reactions to seasoned equity offerings (SEOs). The normally positive relation between imbalances and returns disappears for trade number imbalances but remains intact for dollar imbalances following SEOs. The return-imbalance delinkage is most pronounced for SEO stocks in which institutions (non-institutions) are net sellers (buyers). We also find that the SEO portfolio in which large institutional investors are net sellers strongly underperforms the complementary portfolio in which they are net buyers.