Investor Sentiment and Corporate Finance: Micro and Macro

this paper, we provide some new evidence that cuts in favor of the behavioral view. Our starting point is Paul A. Samuelson's dictum that market efficiency is a better description of the pricing of individual stocks in the cross section than of the pricing of the aggregate market. As quoted by Robert J. Shiller (2001, p. 243), Samuelson claims: "Modern markets show considerable micro efficiency...I [hypothesize] considerable macro inefficiency, in the sense of long waves in the time series of aggregate indexes of security prices below and above various definitions of fundamental values." Samuelson's dictum has been made concrete in empirical work by John Campbell (1991) and Tuomo Vuolteenaho (2002). Campbell shows that innovations to aggregate stock returns are largely transitory: less than half of the variance in returns is due to changes in expected cashflows, leading to predictable reversals in future returns. If one adopts a behavioral perspective and thinks of return predictability as being indicative of investor sentiment, this is consistent with Samuelson's idea that the aggregate market is quite inefficient, with a large fraction of its price variation being due to non-fundamental factors. In contrast, Vuolteenaho shows that innovations to idiosyncratic firm-level returns are largely permanent: most of the variation in returns is driven by cashflow news, with a smaller component due to time-varying expected returns. This suggests that firm-level relative prices are reasonably efficient, with a smaller role for sentimen

Privatisation Initial Public Offerings: the Polish Experience

The Polish government has preferred gradual direct sales to privatisation initial public offerings (PIPOs) by a 2.8 to 1 margin. Evidence suggests that the government has attempted to manage the timing of PIPOs. We, however, find no evidence of underpricing of PIPOs to a greater degree than that found for issues in the private sector. Both domestic and international investors in PIPOs earned predominantly positive buy-and-hold returns up to 36 months after listing. The difference between PIPOs and private sector IPOs average returns is statistically significant only for international investors. Copyright Blackwell Publishing Ltd, 2003.

Is there useful information in the 'use of proceeds' disclosures in IPO prospectuses?

This study contributes evidence on the valuation relevance of the 'use of proceeds' disclosure in the initial public offering (IPO) prospectus. This article develops a classification of 'use of proceeds' disclosures that aims to capture information embedded in the disclosures relating to the purpose (growth, production, financing) and amount committed to specific assets. These measures are then related to IPO underpricing, survival prediction and expected and realised prospects of the IPOs. The results suggest the 'use of proceeds' disclosure categories have incremental information over other sources of information for underpricing, for predicting firm survival and in the case of some disclosure categories, for investors' evaluation of the firms' prospects and risks in the early years after listing