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IPO Activity and Market Volatility

Journal of Entrepreneurship and Public Policy, Forthcoming

21 Pages Posted: 27 Sep 2017  

Mehmet F. Dicle

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business

John Levendis

Loyola University New Orleans

Date Written: September 25, 2017

Abstract

We hypothesize two channels in which market volatility affects initial public offering (IPO) activity. First, CEOs time the market for IPOs and volatility makes this decision process harder. Second, risk-averse IPO investors become more reluctant towards IPOs during periods of higher volatility for their after-IPO returns. We provide evidence that higher market volatility leads to lower IPO activity, supporting these hypotheses. More importantly, we show that it is not the realized volatility, but rather the implied (expected) volatility, that leads to lower IPO activity. While there may be many companies who are ready to have IPOs, they may be simply waiting for a more opportune time which may not necessarily be a period of high prices but of low volatility.

Keywords: IPO, volatility, market timing, investor sentiment

JEL Classification: G10, G14

Suggested Citation

Dicle, Mehmet F. and Levendis, John, IPO Activity and Market Volatility (September 25, 2017). Journal of Entrepreneurship and Public Policy, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3042995

Mehmet Dicle (Contact Author)

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business ( email )

6363 St. Charles Avenue
New Orleans, LA 70118
United States

HOME PAGE: http://researchforprofit.com

John Levendis

Loyola University New Orleans ( email )

6363 St. Charles Ave., box 15
New Orleans, LA 70118
United States

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