IPO Waves and Hot Markets in the UK
Chapter 4 (pp. 76-97) in Handbook of Research on IPOs, edited by Mario Levis and Silvio Vismara, Cheltenham, UK: Edward Elgar Publishing, 2013
31 Pages Posted: 19 Jan 2013 Last revised: 19 Feb 2014
Date Written: September 5, 2013
This paper examines the cyclical nature of IPO activity in the UK. The results indicate a lead-lag relationship between IPO initial returns and volume. IPO volume is sensitive to recent changes in market conditions. There is evidence of industry concentration in hot markets, and firms raise more equity during these periods. Overall, IPO waves in the UK share similar characteristics with those in the US. The findings are consistent with rational explanations of IPO waves. However, explanations based on investor sentiment and market timing cannot be ruled out, since there is a strong positive relationship between IPO volume and the market's price-to-book ratio.
Keywords: IPO, underpricing, investor sentiment
JEL Classification: E32, G32
Suggested Citation: Suggested Citation