Momentum Investing: The Case of High-Tech Ipos

20 Pages Posted: 2 Feb 2004

See all articles by Satish Thosar

Satish Thosar

University of Technology Sydney (UTS) - School of Finance and Economics

Sanjiv Jaggia

Suffolk University - Department of Economics

Abstract

We document significant momentum effects in the high-tech IPO aftermarket beyond the initial (underpricing) run-up. Cumulative market-adjusted returns (CMARs) reveal a striking pattern. A local peak of just over 10 percent is reached around 20 trading days post-IPO coinciding with the expiry of the "quiet period". A global peak (of about 33 percent) is reached after 105 trading days. The CMAR decays fairly rapidly thereafter possibly in anticipation of the expiry of the six-month lockup period. Further, we find strong evidence of a linkage between technical ex-ante observable variables and the momentum build-up. We conjecture that visceral factors may at least partially underlie the investor behavior that gives rise to the bubble-like CMAR pattern.

Suggested Citation

Thosar, Satish and Jaggia, Sanjiv, Momentum Investing: The Case of High-Tech Ipos. Available at SSRN: https://ssrn.com/abstract=495982 or http://dx.doi.org/10.2139/ssrn.495982

Satish Thosar

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

PO Box 123
Haymarket
Sydney, NSW 2007
Australia

Sanjiv Jaggia (Contact Author)

Suffolk University - Department of Economics ( email )

8 Ashburton Place
Boston, MA 02108
United States
(617)573-8023 (Phone)
(617)994-4216 (Fax)

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