Abstract
Issuing activity does not result in superior post-issue liquidity. New issues are just as liquid as their peer non-issuers. Even the kinds of new issues that are supposed to be more liquid than others (initial public offerings (IPOs) backed by venture capital, new issues with high-prestige underwriters, severely underpriced IPOs) have the same liquidity as other similar issuers. The paper thus refutes the existing liquidity-based explanations of the new issues puzzle. The paper also shows that the low-minus-high turnover factor seems to explain the new issues puzzle and related anomalies only because it picks up volatility risk.
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