The evidence indicates that stock prices decrease by approximately 3%, on average, when new equity issues are announced.

Name: The evidence indicates that stock prices decrease by approximately 3%, on average, when new equity issues are announced.
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Question

Quizplus · Accepted Answer

This statement is true based on empirical studies and market data analysis. It is known as the "issuance effect" and occurs because new equity issues dilute the ownership of existing shareholders, leading to a decrease in stock prices.

The Evidence Indicates That Stock Prices Decrease by Approximately 3