UK IPOs: Long Run Returns, Behavioural Timing and Pseudo Timing

47 Pages Posted: 28 Oct 2008 Last revised: 4 Oct 2009

Alan Gregory

University of Exeter - Xfi Centre; University of Exeter Business School

Cherif Guermat

Bristol Business School

Fawaz Al-Shawawreh

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2009

Abstract

In this paper we examine a comprehensive set of 2,567 UK IPOs launched between mid-1975 and the end of 2004. We find compelling evidence of long run under-performance that persists for between 36 and 60 months post-flotation, depending on the precise method chosen to measure abnormal returns. Following Schultz (2003), we ask whether our results are consistent with "pseudo-timing". Equally-weighted returns in calendar time provide further evidence of under-performance, a result that favours the Loughran and Ritter (2000) behavioural timing hypothesis rather than the Schultz (2003) pseudo-timing hypothesis. However, when we measure value-weighted returns in calendar time we find that abnormal returns are not significantly different from zero. To some degree, this result is consistent with the findings of other studies which show that IPO under-performance is concentrated in smaller firms. However, we also show that these value-weighted returns are heavily influenced by the high abnormal returns associated with UK privatisations.

JEL Classification: G14, G32

Suggested Citation

Gregory, Alan and Guermat, Cherif and Al-Shawawreh, Fawaz, UK IPOs: Long Run Returns, Behavioural Timing and Pseudo Timing (September 1, 2009). Available at SSRN: https://ssrn.com/abstract=1291051 or http://dx.doi.org/10.2139/ssrn.1291051

Alan Gregory (Contact Author)

University of Exeter - Xfi Centre ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 3BZ
United Kingdom

University of Exeter Business School ( email )

Streatham Court
Xfi Building Rennes Dr.
Exeter, EX4 4JH
United Kingdom

Cherif Guermat

Bristol Business School ( email )

Frenchay Campus
Bristol, BS16 1QY
United Kingdom

Fawaz Al-Shawawrah

affiliation not provided to SSRN ( email )

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