Analyzing investments made in conjunction with the announcement of rights issues between 2014-2018

Abstract

Rights issues are a common way for companies to attain funding. The rights to buy stocks are usually sold with a discount to the investor. The goal of this essay is to study price movements associated with the announcement that a company will undertake a rights issue and the stocks 1-year return. The study also creates a daily rebalancing portfolio, which measures the 1-year return of rights issuing companies. Rights issues containing options programs and other units have been excluded and 125 companies have been randomly chosen to participate in the study. Constructing a daily rebalancing portfolio of the assets provides a portfolio on par with OMXSPI.