Influence of the Investor’s Short-Term Horizon on IPO Performance: An Emerging Markets Perspective (original) (raw)
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Investor Sentiment, Market Volatility, and IPO Initial Returns
Jurnal keuangan dan perbankan, 2021
This research seeks to determine the impact of investor sentiment and market volatility on IPO initial return when an issuer conducts an Initial Public Offering (IPO). This research lasted ten years, from 2009 to 2020, with a total issuer of 237 conducting Initial Public Offerings (IPOs) on the Indonesia Stock Exchange. The total number of issuers conducting an initial public offering (IPO) met the purposive sampling criteria is 285. Multiple linear regression analysis, with control variables such as Gap of Days, Firm Age, IPO Size, and Firm Size, is used to determine the effect of Investor Sentiment and Market Volatility on IPO Initial Returns. The findings showed that Investor Sentiment and Market Volatility positively affected the IPO Initial Return during the study period. This research aims to increase investor awareness of the importance of IPO stock price, increasing the initial return in the future. In Indonesia, Otoritas Jasa Keuangan (OJK) plays a critical role in policies that facilitate Indonesian investors' monitoring of the volatility of stock price changes in the market.
Impact of Investors Sentiment on Ipo Performance: Evidence from Nasdaq and Nyse
Journal of Business, Economics and Finance, 2022
Purpose-The paper explores the correlation between investors' sentiment, underpricing and performance over a period of 36 months of newly issued American stocks with a sample of 199 newly listed firms on NASDAQ and NYSE within the period of January 2015 to April 2021. IPOs listed on US stock exchanges have received little attention even though anomalies related to new stock issues are well documented. We aim to fill the existing academic gap. Methodology-We have hypothesized investor sentiment as the potential explaining variable inducing the anomalies observed and we extract this variable from the American Association of Individual Investors 1 survey results per the nearest date of each IPO issue. We compute the returns in two separate timeframes. The Market Adjusted Initial Returns (MAIRs) are computed as the price change observed during the offer day, adjusted to the S&P500 index. We investigate long-term performance by calculating the Buy-and-Hold Abnormal Return (BHARs) of each IPO for a period of 36months. The company characteristics, which are age, proceeds, number of issued shares, venture capital backing status and economic sector, are retrieved from Thomson Reuter's screens to control on IPO pricing. Then we use a regression model to see whether the predictor variable has an effect on the outcome variable. Findings-We found that the correlation between the bullish ratio and the MAIRs confirms results found in previous literature and no relationship between investor sentiment and long run performance have been observed. Conclusion-We conclude that on American stock markets, the existing underpricing can be explained by investors overreacting to new issues while findings relative to the long run performance contradict earlier research, as there is no evidence of underperformance among companies that went public between January 2015 and April 2021. Further research can be oriented toward understand why the documented poor performance related to IPOs no longer exists, as well as the particular characteristics of US markets which are favorable to the profitability of the new issues in the long-term.
Investor sentiment and IPO pricing: Market: Evidence from India
Corporate Ownership & Control, 2018
The present paper aims at understanding the variability in IPO volume and initial return in Indian capital market. In order to see whether the IPOs were timed with the favourable market or not the market was divided into the hot and cold market, defined on the basis of the monthly IPO volume. Then the relationship between market type and total proceeds was established with the help of a multivariate regression model with the idea that any timing attempt should be reflected in the activity of issuance of equity. The result based on multivariate regression suggest that Market timers, identified as firms that go public when the market is hot, tried to maximize the total proceeds at the time of IPO. The hot-market effect is remarkably robust; it is significant for both firm and industry-level characteristics
Journal of Multinational Financial Management, 2000
This paper empirically analyzes the initial and after-market returns for the Turkish initial public offerings (IPOs) to provide an emerging market case of international evidence on performances of IPOs. The sample consists of 163 firms listed and traded on the Istanbul Stock Exchange during the period of 1990 -1996. The results show that the Turkish IPOs are underpriced on initial trading day on average of 13.1%. The initial underpricing is 11.7% for industrial firms, 15% for financial firms and 17.6% for others. In terms of sub-sectors the highest return is obtained in Tourism/Transportation group, while the lowest return is observed in Machinery/Equipment group. With the exception of Banking group, all of the sub-sectors experienced statistically significant initial underpricing. The investigation of factors influencing the initial performance show that size of issuer, rising stock market between the date of public offering and first trading day, institutional ownership, and self-issued offerings are significant determinants of underpricing.
International Journal of Financial Research
The main purpose of this study is to investigate an important issue in behavioural finance area that is the role of investor sentiment in determining firm performance, alongside with market timing and other fundamental firm factors in the context of Malaysian market. The impact of pre and post financial crisis during study period of 2004 to 2015 is incorporated in the analysis. The study uses a balanced panel data of 143 IPO firms in Malaysia during the study period. The sentiment index is developed using panel data cross section based on three IPOs proxies, which are IPO volume, market turnover and dividend premium. The findings indicate that market timing is found to have a strong influence towards firm performance with a positive and high level of significance relationship during pre and post financial crisis. Whereas investor sentiment does influence firm performance, particularly when timing is proxied by initial return before the financial crisis period. Other firm specific fa...
[Personal Memo] Investor Sentiment and IPOs Anomalies
It is worthwhile to investigate abnormal performance of IPOs by incorporating investor sentiment. Using the method of Agent-based Computational Finance (ACF), we analyze the effect from different kinds of investor sentiment on IPOs first-day underpricing and long-term performance. The results show that individual investor's sentiment is positively correlated with the IPO's first-day underpricing and its long-run performance. In the long run, along with the rising of individual investor sentiment, IPOs' long-term performance will change from underperforming to outperforming. This conclusion provides a more reasonable explanation for the different IPOs long-term performance.
Factors that determine IPO returns: Literature review
International journal of applied research, 2017
Initial public offerings (IPOs) generate enormous curiosity both in investors and researchers in finance, for varied reasons. Investors, being true to their interests, would look at an IPO as an instrument to increase their returns, on the other hand researcher look at each IPO to determine if it is following the established pattern or is it defying. Research on IPOs begun in early 1980s and since then researchers could not comprehend fully and explain the IPO firm’s stock market performance, including its valuation.
Emerging Stock Markets and Performance of IPOs: An Application to the Regional Stock Exchange (RSES)
Bohr publishers, 2022
The aim is to determine the short-term profitability of IPOs and to surrounding the evolution of this profitability on the middle/long run. Therefore, we used the raw initial returns and the adjusted initial returns methods to assess the short-term performance. We determined the long-term performance through the cumulative abnormal returns and the buy-and-hold abnormal returns, abnormal returns being adjusted to the market index and to the market model. By applying those methods to the eleven (11) IPOs' made on the RSES from September 16 th 1998 to December 31 st 2011, we drawn two main conclusions. First of all, our results reveal that RSES's IPOs present a great initial underpricing during this period and that, the adjustment of initial returns to market index negatively affected them. Then, the holding of these stocks on the middle/long run lead to their underperformance compared to the market portfolio. However, the long-term performance with buy-and-hold abnormal returns (BHARs) is less deteriorated than the one with cumulative abnormal returns (CARs). Those results imply that, buying IPOs at the offer price is profitable to investors in the short run and the holding of those stocks in the middle and long run must be done through the buy-and-hold investment strategy.
Hot Markets, Investor Sentiment, and IPO Pricing
Journal of Business, 2006
We are grateful to Ross Levine, James Montier, and William Wilhelm for helpful f eedback. The usual disclaimer applies. Hot Markets, Investor Sentiment, and IPO Pricing Abstract Our model of the initial public offering process links the three main empirical IPO ?anomalies? ? underpricing, hot issue markets, and long-run underperformance ? a nd traces them to a common source of inefficiency. We relate hot IPO markets (such as the 1999/2000 market for Internet IPOs) to the presence of a class of investors who are ?irrat ional? in the sense of having exuberant expectations regarding future performance. Underpr icing and long-run underperformance emerge as underwriters attempt to maximize profits from the sale of equity, at the expense of these exuberant investors. Underpricing se rves to compensate regular IPO investors for their role in restricting the supply of ava ilable shares and maintaining prices. The model is shown to be consistent with many aspects of the IPO process. It also generates a number of new empirical predictions.