Share price and mortality: An empirical evaluation of newly listed Nasdaq stocks

https://doi.org/10.1016/S0304-405X(97)00019-6Get rights and content

Abstract

We examine a sample of 5896 stocks listed on Nasdaq between 1974 and 1988 to see whether the price per share has significant statistical power in forecasting subsequent returns and attrition rates. Consistent with anecdotal evidence, we document a higher mortality rate for lower-priced stocks than for higher-priced issues. Surprisingly, mortality is not related to market capitalization. Our results also hold for subsamples partitioned by industry and issue year. On average, investors are not adequately compensated for this additional mortality risk, earning lower risk-adjusted rates of return on portfolios of lower-priced shares than on portfolios of higher-priced shares.

References (21)

There are more references available in the full text version of this article.

Cited by (57)

  • On modeling IPO failure risk

    2022, Economic Modelling
View all citing articles on Scopus
View full text