n Investment Analysts Journal - Convergence to market efficiency : the case of seasoned equity offering stocks

Volume 44, Issue 1
  • ISSN : 1029-3523
  • E-ISSN: 2077-0227
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This study examines the relationship between returns and contemporaneous and lagged-order imbalances by regression analysis. Conditional on contemporaneous imbalances, a significantly negative relationship is found between lagged-one imbalances and returns, except for a 10-minute time interval. This suggests that seasoned equity offering (SEO) markets converge to efficiency within 10 minutes. In addition, a GARCH model is used to examine the dynamic relationship between volatility and order imbalances. The empirical results demonstrate that market-makers effectively mitigate volatility in SEO announcements, demonstrating a price stabilisation capability in secondary market-making.

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