Which Investors Leave Money on the Table? Evidence from Rights Issues

This study documents patterns of investor behavior around Finnish rights issues. We find that shareholders of issuing companies lost at least 9.9 million in aggregate from 1995 to 2002 by exercising rights too early, selling rights in the open market below their intrinsic value, or leaving rights unexercised. At the investor level, the losses are modest. For example, the median household investor suffered a loss of 135 from not exercising or selling the rights. Investors with small portfolios, inactive trading history, those who know neither of the official languages in Finland, or who are living abroad leave money on the table the most.

The market’s crystal ball is broken
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Credit card rates, fees marching up
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Gift cards: A bad idea gets even worse
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Which Investors Leave Money on the Table? Evidence from Rights Issues

This study documents patterns of investor behavior around Finnish rights issues. We find that shareholders of issuing companies lost at least 9.9 million in aggregate from 1995 to 2002 by exercising rights too early, selling rights in the open market below their intrinsic value, or leaving rights unexercised. At the investor level, the losses are modest. For example, the median household investor suffered a loss of 135 from not exercising or selling the rights. Investors with small portfolios, inactive trading history, those who know neither of the official languages in Finland, or who are living abroad leave money on the table the most.

Estimating the Costs of International Equity Investments

Generalizing Cooper-Kaplanis (1994), we estimate implied costs that reconcile international portfolios with InCAPM predictions. Costs depend on home- and host-country characteristics and on interactions; we estimate risk tolerance rather than pre-specifying it; and we control for currency risk, inflation hedging, fixed-interest investments, round-tripping and omitted countries. Estimates for developed markets are lower than reported before, but those for new markets are quite high: 2001-2004 inward shadow costs range from 0.01 %p.a. (US) to 37 (Indonesia). We find that equity home bias is related to a mixture of risks and frictions, such as information asymmetries, institutional factors and explicit costs.

Thanksgiving rally boosts Dow 247
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Home prices by metro area
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Citigroup rescue may give stocks a boost
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Dow up 36 as Fed moves cheer traders
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