The stock prices of companies that use the same lead
underwriter during their equity offerings tend to move together, according to a
new study by financial economics experts at Rice University and the University
of Alabama.
“We tested the
hypothesis that investment banking networks affect stock prices and trading
behavior,” said James Weston, a professor of finance at Rice’s Jones Graduate
School of Business. “Consistent with the notion that investment banks such as
Goldman Sachs and Merrill Lynch serve as information hubs for segmented groups
of investors, the stock prices of companies that use the same lead underwriter
during their equity offerings tend to move together.”