If the market price of existing publicly traded shares declines due to the announcement of a seasoned issue of stock, the decline is referred to as which one of the following?

Question

Quizplus · Accepted Answer

When the market price of existing publicly traded shares declines due to the announcement of a seasoned issue of stock, this is referred to as an abnormal return. An abnormal negative return during this time period indicates that investors perceive the issuance of new shares to be a negative signal for the company's future prospects, resulting in a decrease in the stock price.

If the Market Price of Existing Publicly Traded Shares Declines