Quantitative Research on the Return of Private Seasoned Equity Offerings: Evidence from China

This paper quantitatively analyses the relation between the return of private

seasoned equity offerings and variables of market and firm characteristics in China Ashare

market. A multiple-factor linear regression model is constructed to estimate this

relation and the result canhelp investors to determine the future return of private

placement stocks.

In this paper, I first review past theories about private placement stocks, including how

the large shareholder participation, the discount of private offerings, the firm

characteristics, and the investment on firm value will affect the return of private

offerings.

According to the past literature, I propose four main factors that may affect the

return of private placement. They are the large shareholders participation in private

placement; the discount that private placement could offer; the characteristics of the

companies that offer a private placement and the intrinsic value of such companies. I

adopt statistic and correlational analysis to test the impact of each factor. Then,

according to this single-factor analysis, I set up a multiple-factor linear regression model

on private seasoned equity offerings return in Chapter Four.

In the last two chapters, I apply this quantitative model to other fields. I use this

model to testify current financial products of private placement and develop investmen

strategies on stocks with private seasoned equity offerings in secondary market. My

quantitative strategy is useful according to the result of setback test.