Predicting Excess Returns with Public and Insider Information: The Case of Thrift Conversions.

We hypothesize that mutual thrifts often converted to stock ownership when the returns to conversion were predicted to be high. We show that excess returns on the initial public offerings (IPOs) of thrift conversions during the 1990s were predictable with publicly available data. The same conditions that predicted higher excess returns on thrift conversions also predicted that conversion was more likely. Higher predicted excess returns significantly raised the amounts of the IPOs that insiders at converting thrifts purchased. Data for insider purchases, which were publicly available before the first day of trading, further helped the public predict excess returns.