Exploring Long-Run Abnormal Performance Using Stochastic Dominance Criteria: Additional Evidence from Ipos

40 Pages Posted: 5 May 2004

See all articles by Abhay Abhyankar

Abhay Abhyankar

University of Exeter Business School, University of Exeter

Keng-Yu Ho

National Taiwan University

Multiple version iconThere are 2 versions of this paper

Date Written: January 6, 2004

Abstract

We re-visit long-run performance after IPOs using a model-free stochastic dominance approach that allows us to compare the empirical distribution of portfolio payoffs while incorporating assumptions about investors' preferences. Our main results are as follows. First, we find that investors, who prefer more wealth to less, are indifferent between an IPO firm portfolio and commonly used benchmark portfolios. Second, we find little evidence that risk-averse investors prefer small size and low book-to-market benchmark portfolios to an IPO portfolio. We conclude that, In the case of IPOs at least, the question of abnormal underperformance may remain unresolved empirically, even with better statistical methods and a well-specified asset pricing model, due to the latitude available in the ex ante choice of a benchmark to compare relative performance.

Keywords: Stochastic Dominance, Initial Public Offering, Long-Run Stock Price Performance, Market Efficiency.

JEL Classification: D81, G11, G30

Suggested Citation

Abhyankar, Abhay and Ho, Keng-Yu, Exploring Long-Run Abnormal Performance Using Stochastic Dominance Criteria: Additional Evidence from Ipos (January 6, 2004). EFMA 2004 Basel Meetings Paper. Available at SSRN: https://ssrn.com/abstract=484762 or http://dx.doi.org/10.2139/ssrn.484762

Abhay Abhyankar

University of Exeter Business School, University of Exeter ( email )

Streatham Court
Exeter, EX4 4PU
United Kingdom

Keng-Yu Ho (Contact Author)

National Taiwan University ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

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