Is There a Window of Opportunity for Seasoned Equity Issuance?




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    • Bayless is from the College of Business, Wayne State University. Chaplinsky is from the Colgate Darden Graduate School of Business Administration, The University of Virginia. We acknowledge the helpful comments of Jim Hamilton, Bob Korajczyk, Deborah Lucas, James Seward, René Stulz (the editor), three anonymous referees, and the seminar participants at the Universities of Iowa and Virginia, Arizona State, Boston University, Northwestern, Wayne State, the 1993 American Finance Association meetings, and the NBER Summer Workshop in Corporate Finance. Rajeesh Sashital and Jagadish Kadakar provided excellent research assistance.


The aggregate volume of equity issues is used to search for periods when seasoned equity capital can be raised at favorable terms. We find that the price reaction to equity issue announcements in high equity issue volume (HOT) periods is approximately 200 basis points lower on average than in low equity issue volume (COLD) periods. The lower price reaction in hot markets is economically important and is independent of the macroeconomic characteristics of hot and cold markets. The evidence supports the existence of windows of opportunity for equity issues that result at least partially from reduced levels of asymmetric information.