The Abnormal Returns for Initial Public Offerings Over Longer Time

question 30

Multiple Choice

The abnormal returns for initial public offerings over longer time periods seem to call market efficiency into question because:

• A)the average returns at announcement are large and positive while the long-term results
• Are much lower than the returns for seasoned equity offerings.
• B)the average returns at announcement are small and negative while the long-term results
• Are much lower than the returns for seasoned equity offerings.
• C)the average returns at announcement are zero while the long-term results are much higher
• Than the returns for seasoned equity offerings.
• D)the average returns at announcement are large and positive while the long-term results
• Are much higher than the returns for seasoned equity offerings.
• E)the average returns at announcement are insignificant while the long-term results are
• Much lower than the returns for seasoned equity offerings.

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Definitions:

Undue Influence

A legal term that refers to a situation where an individual is able to influence another person's decisions due to the power dynamic between them, often leading to unfair outcomes.

Fraudulent Misrepresentation

Fraudulent misrepresentation is a false statement made by one party to another, with the intent to deceive and induce the other party to act, resulting in harm.

Undue Influence

An illegitimate power exercised by one person over another in order to induce the latter to make a decision or a legal transaction that greatly benefits the former.

Non Est Factum

A legal defense claiming that a contract is invalid because the signer was unaware of its nature due to an honest mistake.