The Journal of Finance · 2003 · 321 citations · 14 references
MusicFinancial EconomicsEngineeringMarket TrendSecurity AnalysisQuiet Period GoesNoise PollutionBusinessNoiseQuiet PeriodEnvironmental NoiseStock Market PredictionFinancial ForecastIpo Quiet PeriodFinanceAbnormal Returns
The IPO quiet period ends 25 calendar days after the offering, and this study examines its expiration. The study investigates the timing and prevalence of analyst coverage initiation for IPOs between 1996 and 2000. The authors analyzed IPOs from 1996 to 2000, finding that analyst coverage was initiated immediately for 76 % of firms, almost always with a favorable rating. Firms with immediate coverage earned a five‑day abnormal return of 4.1 % versus 0.1 % for firms without coverage, with abnormal returns concentrated just before the quiet period expires and larger when multiple analysts initiate coverage, regardless of lead underwriter recommendation.
We examine the expiration of the IPO quiet period, which occurs after the 25th calendar day following the offering. For IPOs during 1996 to 2000, we find that analyst coverage is initiated immediately for 76 percent of these firms, almost always with a favorable rating. Initiated firms experience a five‐day abnormal return of 4.1 percent versus 0.1 percent for firms with no coverage. The abnormal returns are concentrated in the days just before the quiet period expires. Abnormal returns are much larger when coverage is initiated by multiple analysts. It does not matter whether a recommendation comes from the lead underwriter or not.
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