Does it Pay to Invest in IPOs? Evidence from the Warsaw Stock Exchange

National Bank of Poland Working Paper No. 139

37 Pages Posted: 9 Feb 2013

See all articles by Rafał Sieradzki

Rafał Sieradzki

Cracow University of Economics; National Bank of Poland

Date Written: January 1, 2013


In this paper we analyze IPO underpricing on the Warsaw Stock Exchange between 2003 and 2011. The average initial return was positive (14.2%), which is similar to the findings on other equity markets. Medium and long-run abnormal returns (1-month, 3-months and 1-year) on average are negative and they show great standard deviations. In general, the more time elapses from the offer day the lower the return from the IPO investment is. The abnormal initial return (AIR) was 2.9% which suggests that although in net terms IPO investments were profitable for investors the rate of return was quite small. Using leverage did not help much to boost returns. Not surprisingly the highest initial returns yielded IPOs of private domestic companies and (what is more striking) offers made by companies that migrated to the WSE from RPW CeTO market or NewConnect platform. This observation goes against information asymmetry theories of IPOs underpricing. Also the abnormal initial return was the highest in case of the latter companies. Four determinants of IPOs underpricing proved to be significant at 0.001 level including: Parkinson’s Extreme Value, reduction rate, fad and turnover ratio. These variables explain over 34% of the IPOs initial returns.

Keywords: new equity offerings, IPOs, underpricing, investment strategies

JEL Classification: G11, G12, G14, O16

Suggested Citation

Sieradzki, Rafał, Does it Pay to Invest in IPOs? Evidence from the Warsaw Stock Exchange (January 1, 2013). National Bank of Poland Working Paper No. 139, Available at SSRN: or

Rafał Sieradzki (Contact Author)

Cracow University of Economics ( email )

ul. Rakowicka 27
Krakow, 31-510

National Bank of Poland ( email )


Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics