Economics at your fingertips  

IPO First-Day Return and Ex Ante Equity Premium

Hui Guo ()

Journal of Financial and Quantitative Analysis, 2011, vol. 46, issue 3, 871-905

Abstract: This paper proposes a measure of ex ante equity premium, IPOFDR, which is the average difference between the initial public offering (IPO) offer price and the 1st-trading-day close price. I test the idea in 3 ways. First, there is a positive relation between IPOFDR and future market returns. Second, changes in IPOFDR help explain the cross section of stock returns. Third, the predictive power of IPOFDR for stock returns reflects mainly its close relation with market variance and average idiosyncratic variance—arguably measures of systematic risk. These results cast doubt on the notion that the IPO 1st-day return is a measure of investor sentiment.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Keith Waters ().

Page updated 2020-08-25
Handle: RePEc:cup:jfinqa:v:46:y:2011:i:03:p:871-905_00