Wealth Gains from Tracking Stocks: Long-Run Performance and Ex-Date Returns

Forthcoming, Financial Management

43 Pages Posted: 21 Dec 2002 Last revised: 17 Dec 2015

See all articles by Matthew J. Clayton

Matthew J. Clayton

University of Virginia - McIntire School of Commerce

Yiming Qian

University of Connecticut - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 2004

Abstract

We examine the long-run performance of the tracking stocks, the parent stocks, and the combined companies following the issue of tracking stock, as well as the performance of the firms prior to the tracking stock issue. Our results indicate that the long-run performance is not significantly different from benchmark portfolio returns. Investigation of the ex-date returns for firms issuing tracking stocks reveals a significant mean ex-date abnormal return of 3.12 percentage points. The results suggest that the wealth gains due to the announcement effect are permanent, and they underestimate the total wealth gains from the tracking stock issues.

Keywords: tracking stock, ex-date returns, long-run returns, restructuring

JEL Classification: G14, G34

Suggested Citation

Clayton, Matthew J. and Qian, Yiming, Wealth Gains from Tracking Stocks: Long-Run Performance and Ex-Date Returns (July 1, 2004). Forthcoming, Financial Management, Available at SSRN: https://ssrn.com/abstract=349720 or http://dx.doi.org/10.2139/ssrn.349720

Matthew J. Clayton (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

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Yiming Qian

University of Connecticut - Department of Finance ( email )

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