IPO Volume, Initial Return, and Market Condition in the Malaysian Stock Market

Abstract

This paper examines the variability in initial returns, IPO volumes, and market conditions of the IPO listed in Bursa Malaysia during the period from January 2000 to December 2010. The IPO volume is highly auto correlated at low lags and decreases during the high lags. Examining the interrelation between IPOs volume, initial return, and market condition shows that market volatility causes the initial return, the initial return causes IPO volume, intraday volatility causes aftermarket volatility, and aftermarket volatility causes market volatility. These suggest that, over the sample period, issuers depend on the information in the initial return while taking the decision to go public. The results also document that the past quarter’s initial return and market condition highly influence the number of IPO issued the following month. The evidence over the periods of study shows that the initial return and market condition are related to the variability of IPO volume. Therefore the information on the initial return and market condition is important to both issuers and investors in making the decisions.

Keywords: Initial Return, IPO Volume, Market Condition

JEL Classification: E44