Investor Demand for IPOs and Aftermarket Performance: Evidence from the Hong Kong Stock Market
Georgetown University - Department of Finance
University of Nevada, Reno - College of Business
S. Ghon Rhee
University of Hawaii - Shidler College of Business; University of Hawaii - Department of Financial Economics and Institutions
Journal of International Financial Markets, Institutions and Money, Forthcoming
In this study, we examine the relation between investor demand for IPOs prior to offerings and aftermarket performance of IPO firms in the Hong Kong stock market. The paper finds that IPOs with high investor demand have large positive initial returns but negative long-run excess returns, while IPOs with low investor demand have negative initial returns but positive long-run excess returns. This study demonstrates that investor demand for IPOs is possibly driven by investors' overreaction (either optimistic or pessimistic) to the information about IPO firm prospects prior to offerings.
Keywords: Initial Public Offering, Aftermarket Performance, Investor Demand
JEL Classification: G12, G14, G24
Date posted: June 7, 2006
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