The paper uses an event study to examine stock returns associated to public equity issues carried out by Brazilian firms listed on BOVESPA, from 1992 to 2002, with the purpose of determining how the market reacted before, during, and after the issue announcement dates. After utilizing the conventional method for measuring abnormal returns by OLS, we used ARCH and GARCH models, which take into account the conditional heteroskedastic volatility of the abnormal returns in more than 70% of the sample, since the presence of these processes was found in the original residuals. The results show that (1) there is evidence of insider information prior to the announcement date, (2) abnormal returns occurred on the announcement date, and (3) within one year after the issues, the shares of issuing firms had negative returns after adjusting for risk and market effects.
Event Study; Stock Issues; Brazilian Firms; ARCH; GARCH
