Anomalous Market Reaction to Right Share Offers in Bangladesh

Anomalous Market Reaction to Right Share Offers in Bangladesh

Author: zant worldpress

We have examined the right offers made between January 2010 to October 2012 by

companies listed on the Dhaka Stock Exchange and tested the speed of adjustment of

market price of the issuers to the right issues. The analysis leads to the conclusion that the

adjustment is not immediate, the market price is about 10-11 percent higher than the right

adjusted price on the average and the difference is statistically significant. It takes about

15 days for the market price to reach a stage where the difference between the market

price and right adjusted price is no longer statistically significant. This delay in adjustment

can actually lead to a profitable strategy for investors in which the investor holds the stock

till record date and then sells the stocks at the first opportunity after the record date.

JEL Codes: G11 G12 G14 N25

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