Abstract

I use intraday prices to explore the time-varying characteristic of the systematic risk around unscheduled firm-level news writing about secondary equity offering (SEO) programs. I show that, around this information flow, the beta drops by a statistically significant and economically important amount. Firm-level news about an SEO program leads to a sharp decrease in the company's systematic risk of 33.4% on the day that the news is reported. These results are consistent with investors' rationality and managers' signals about company valuation. That is, investors sell overvalued firms in favour of more fairly valued companies. Further, the results show that the sentiment of news does not explain the change in the systematic risk. So, investors should closely monitor news taxonomy to understand their risk exposure around information flow. Finally, I show that, through the systematic risk variation documented in this paper, it is possible to explain more than 50% of the negative abnormal return observed on the SEO announcement date.

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