Investor Demand for Ipos and Aftermarket Performance: Evidence from the Hong Kong Stock Market

Working Paper No. 10-4

33 Pages Posted: 7 Dec 2004

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Chunlin Liu

University of Nevada, Reno - College of Business

S. Ghon Rhee

University of Hawaii - Shidler College of Business; University of Hawaii - Department of Financial Economics and Institutions

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Abstract

In this study, we examine the relationship between investor demand for IPOs prior to offerings and aftermarket performance of IPO firms during the period from 1993 to 1997 in the Hong Kong stock market. The paper finds that IPOs with high investor demand have large positive initial returns but negative longer-run excess returns, while IPOs with low investor demand have negative initial returns but positive longer-run excess returns. The paper demonstrates that investor demand for IPOs is largely driven by investor over-optimistic and over-pessimistic reaction to the information about the IPO's prospects prior to offerings.

Keywords: Initial Public Offering, Aftermarket Performance, Investor Demand

JEL Classification: G12, G14, G24

Suggested Citation

Agarwal, Sumit and Liu, Chunlin and Rhee, S. Ghon, Investor Demand for Ipos and Aftermarket Performance: Evidence from the Hong Kong Stock Market. Working Paper No. 10-4. Available at SSRN: https://ssrn.com/abstract=617343 or http://dx.doi.org/10.2139/ssrn.617343

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Chunlin Liu (Contact Author)

University of Nevada, Reno - College of Business ( email )

University of Nevada, Reno
Reno, NV 89557-0016
United States

S. Ghon Rhee

University of Hawaii - Shidler College of Business ( email )

2404 Maile Way
C-304, FEI/CBA
Honolulu, HI 96822
United States

University of Hawaii - Department of Financial Economics and Institutions ( email )

United States

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