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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