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

Question

Quizplus · Accepted Answer

The decline in market price of existing publicly traded shares due to the announcement of a new share issue is referred to as abnormal return. Abnormal return is the difference between the actual return on a security and the expected return, and is generally attributed to factors that are outside of the normal market conditions. In this case, the announcement of a new share issue may signal to investors that the company is experiencing financial difficulties or is in need of additional capital, leading to a decrease in the stock price.

If the Market Price of Existing Publicly Traded Shares Declines