Browsing Management and Law by Author "Yin, S."
Stabilization and the aftermarket prices of initial public offeringsMazouz, Khelifa; Agyei-Ampomah, S.; Saadouni, B.; Yin, S. (2012)The paper examines the determinants of stabilization and its impact on the aftermarket prices. We use a unique dataset to relax several assumptions in the stabilization literature. We find that underwriters support IPO prices shortly after listing, particularly in cold markets and when demand is weak. We also show that stabilized IPOs are more common amongst reputable underwriters. This finding suggests that stabilization may be used as a mechanism to protect the underwriter’s reputation. It also implies that reputable underwriters may possess private information and price IPOs closer to their true values (i.e., higher than those indicated by the weak premarket demand). Consistent with the latter view, we show that stabilized IPOs are offered at higher prices and suffer less underpricing than those indicated by the premarket demand, firm characteristics and market-wide conditions. The post-IPO performance results indicate that stabilized IPOs are unlikely to be mispriced as their prices do not exhibit any significant reversal after the initial stabilization period. We conclude that stabilization may be superior to underpricing as it protects investors from purchasing overpriced IPOs, benefits issuers by reducing the total money “left on the table” and enhances the overall profitability of underwriters.
Trading activity in options and stock around price-sensitive announcementsMazouz, Khelifa; Wu, Yuliang; Yin, S. (2015-12)This study investigates the trading activity in options and stock markets around informed events with extreme daily stock price movements. We find that informed agents are more likely to trade options prior to negative news and stocks ahead of positive news. We also show that optioned stocks overreact to the arrival of negative news, but react efficiently to positive news. However, the overreaction patterns are unique to the subsample of stocks with the lowest pre‐event abnormal option/stock volume ratio (O/S). This finding suggests that the incremental benefit of option listing is related to the level of option trading activity, over and beyond the presence of an options market on the firm’s stock. Finally, we find that the pre‐event abnormal O/S is a better predictor of stock price patterns following a negative shock than is the pre‐event O/S, implying that the former may contain more information about the future value of stocks than the latter.