Fads in the Initial Public Offering Market?

Aggarwal, Reena; Rivoli, Pietra

doi:10.2307/3665609

Cited by 329 publications

(217 citation statements)

References 28 publications

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“…Negative aftermarket returns for IPOs have been reported by Ritter (1991), Aggarwal and Rivoli (1990), Loughran and Ritter (1995), Levis (1993), Aggarwal, Leal andHernandez (1993), andFirth (1997). Levis (1993) reports long-run underperformance of -22.96% by the third year after the offering in the UK for 712 IPOs between 1980-1988.…”

Section: 1-prior Researchmentioning

confidence: 98%

“…Aggarwal and Rivoli (1990) establish the possibility that the aftermarket is not immediately efficient in valuing newly issued securities and that the abnormal returns that ensue to IPO investors are the result of a temporary overvaluation by investors in the early trading. This is consistent with the "impresario" hypothesis or the fads 4 hypothesis (Shiller (1990) and Debondt andThaler (1985, 1987)), which argues that the market for IPOs is subject to fads and that IPOs are underpriced by the investment bankers (the impresarios) to create the appearance of excess demand, just as the promoter of a rock concert attempts to make it an "event".…”

Section: 2-reasons For the Aftermarket Underperformancementioning

confidence: 99%

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The aftermarket performance of initial public offerings in Canada

Kooli

Suret

2004

Journal of Multinational Financial Management

112

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CIRANOLe CIRANO est un organisme sans but lucratif constitué en vertu de la Loi des compagnies du Québec. Le financement de son infrastructure et de ses activités de recherche provient des cotisations de ses organisationsmembres, d'une subvention d'infrastructure du ministère de la Recherche, de la Science et de la Technologie, de même que des subventions et mandats obtenus par ses équipes de recherche. Reproduction partielle permise avec citation du document source, incluant la notice ©. Short sections may be quoted without explicit permission, if full credit, including © notice, is given to the source. CIRANO is a private non-profit organization incorporated under the ISSN 1198-8177Ce document est publié dans l'intention de rendre accessibles les résultats préliminaires de la recherche effectuée au CIRANO, afin de susciter des échanges et des suggestions. Résumé / AbstractLa présente étude contribue à l'analyse internationale de la performance à long terme des émissions initiales, menée dans différents pays, en analysant les émissions canadiennes de la période 1992-1998. Nous examinons en particulier dans quelle mesure le choix des mesures de performance influence à la fois l'amplitude des résultats et la puissance des tests statistiques, comme l'affirment plusieurs auteurs tels Mitchell and Stafford (2000), Loughran and Ritter (2000) ainsi que Brav, Geczy et Gompers (2000). L'échantillon inclut 445 émissions initiales réalisées entre janvier 1991 et décembre 1991. Lorsque la méthode des résidus cumulés est utilisée pour mesurer la performance anormale, nous observons que les émissions initiales canadiennes ont une performance significativement inférieure à celle d'entreprises pairées, de taille semblable qui n'ont pas procédé à des émissions. Les résidus moyens pondérés calculés après 3 ou 5 ans sont négatifs lorsque ces rendements sont pondérés par les valeurs des produits bruts. L'effet n'est donc pas imputable uniquement aux petites émissions. Lorsque la méthode de la détention passive est utilisée, nous estimons la perte de richesses des acquéreur des émissions qui les détiennent pendant 5 ans à 24,66% de leur richesse initiale. L'examen des facteurs explicatifs de la performance à moyen et long terme semble confirmer l'hypothèse des fenêtres d'opportunité, alors que les hypothèses basées sur l'irrationalité ou la sur réaction ne semblent pas confirmées. (Mitchell and Stafford, 2000; Loughran and Ritter, 2000;and Brav, Geczy and Gompers, 2000 In this paper, we empirically investigate Canadian initial public offerings (IPOs) to provide one case on the international evidence on the long-run performance of IPOs. Specifically, we examine whether the choice of a performance measurement methodology directly determines both the size and power of statistical test, as documented in previous studies

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Section: 1-prior Researchmentioning

confidence: 98%

Section: 2-reasons For the Aftermarket Underperformancementioning

confidence: 99%

The aftermarket performance of initial public offerings in Canada

Kooli

Suret

2004

Journal of Multinational Financial Management

112

View full text Add to dashboard Cite

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“…Nevertheless, some works relate the underpricing to markets' inefficiency or to irrational behaviours, due to speculation bubbles and market "fads" rather than information asymmetry (Aggarwal and Rivoli, 1990).…”

Section: 0mentioning

confidence: 99%

IPO underpricing and aftermarket performance in Italy

Dell’Acqua

Etro

Tetia

et al. 2015

JEFS

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We analyse a sample of 129 Initial Public Offerings (IPOs) on the Italian Stock Exchange from January 2001 to December 2012. Results confirm the presence of underpricing in two thirds of the sample offerings but with an average level of 6.75% that is far below previous studies. Moreover we provide detailed temporal insights to show that the phenomenon is timevarying, albeit our sample does not show a positive correlation with hot market periods only. The average stock performance 30 days after the listing is lower than average first day return, evidence that is mainly explained by temporary actions of price support by underwriters. Finally, through a series of multivariate regression analyses we find that various factors exercise an influence on the IPO underpricing level, specifically: firm size, aftermarket risk, market demand, financial crisis and shares retention by existing shareholders.

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“…Ritter in 1991 found the 3 year holding period return of IPO was underperformed relative to the matched portfolio listed on American and New York stock exchanges [6]. Aggarwal and Rivoli in 1990 found that the short term abnormal return of IPO in New York Stock Exchange were 10.7%, and the returns were starting to reduce after the first year [7]. IPO in Istanbul Stock Market also generated the short term abnormal return, and low long term returns.…”

Section: Stock Exchange Of Thailandmentioning

confidence: 99%

Short Term IPO Returns in Stock Exchange of Thailand: The Study in 2003-2013

Laokulrach¹

2015

IJTEF

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Abstract-This study examines the short term performance of initial public offering (IPO) in capital market of Thailand from 2003-2013. The daily price data is used in this study to identify the short term returns of IPO of the first trading day until the day that abnormal return cannot be earned. The results confirm the abnormal returns of the first trading day of IPO and also identify that their outperformance returns remain until day 246 after the market. IPO of four industries which are financial, service, resources, and technology outperform the market, while the other four industries which are agro and food, consumer products, industrials, and property and construction do not provide significant abnormal returns.Index Terms-Abnormal returns, first trading day return, IPO, stock exchange of Thailand (SET).

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Fads in the Initial Public Offering Market?

Cited by 329 publications

References 28 publications

The aftermarket performance of initial public offerings in Canada

The aftermarket performance of initial public offerings in Canada

IPO underpricing and aftermarket performance in Italy

Short Term IPO Returns in Stock Exchange of Thailand: The Study in 2003-2013

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