Which One of These Is a Finding of Ritter's Study

question 15

Multiple Choice

Which one of these is a finding of Ritter's study of initial public offerings (IPOs) ?

• A)Firms with either IPOs or SEPs tend to outperform their control groups for the 5-year period following the issue of the new securities.
• B)IPOs are generally incorrectly priced at issuance because over the next 5 years the IPO firm's abnormal returns exceeded 6 percent on average.
• C)The annual returns for IPO firms during the 5-year period following an IPO are about 2 percent lower than their control group.
• D)Comparable IPO and non-IPO firms had similar returns for the 5-year period following an IPO.
• E)IPO firms tend to lose 10 percent or more of their market value in the 2 years following their IPO.

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Definitions:

State Registration Requirement

Legal stipulation that mandates entities or individuals to register with state authorities for conducting certain activities.

Initial Public Offering

The process by which a private company offers shares to the public for the first time to raise capital.

Securities Act

U.S. legislation enacted in 1933 that regulates the sale of securities to the public, requiring disclosure of significant information.

Publicly Held

Describes a company whose shares are traded openly on stock exchanges and can be purchased by the general public.