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Forecasting the value effect of Seasoned Equity Offering announcements: Evidence from BRICS and comparative analysis to USA and European Markets

Zhuqing Huang, Kostantinos Nikolopoulos

Abstract


Purpose –The purpose of this paper is to forecast the value effect of the SEO announcements based on the BRICS stock markets, and to make comparisons with the US and European markets.

Design/methodology/approach –China and Russia are picked as representations of the BRICS based on the analysis of the economic growth of the five countries. Historical data from Shanghai Stock Exchange (SSE) and Moscow Stock Exchange (MSE) between 2010 and 2014 were involved. The authors use the abnormal return to quantify the value effect of SEOs and different models were built with the chosen factors. Modelling tools include EViews and SAS, and comparisons were made among the models.

Findings –Positive market reactions were observed within two and three days after the SEOs in SSE and MSE respectively, negative market reactions exist in a long-run period after the announcements. The best model for the prediction is the auto-neural model.

Research limitations/implications – The sample size could be larger in order to raise the precision of the prediction.

Originality/value – Many empirical studies of the SEOs are based on developed markets. However the emerging markets may react differently. This research focuses on the stock markets in BRICS, which could be seen as representations of the emerging markets, thus could provide ideas and clues for relevant stakeholders in emerging markets before the SEO announcements.

Keywords SEO, BRICS, Value effect, Neural Networks, SSE, MSE

Paper type Research paper


Keywords


SEO, BRICS, Value effect, Neural Networks, Abnormal return

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References


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DOI: http://dx.doi.org/10.5750/jpm.v10i2.1240

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