Investor demand for IPOs and aftermarket performance: Evidence from the Hong Kong stock market

Sumit Agarwal, Chunlin Liu and S. Ghon Rhee

Journal of International Financial Markets, Institutions and Money, 2008, vol. 18, issue 2, 176-190

Abstract: In this study, we examine the relation between pre-offering demand and aftermarket performance of IPO firms in the Hong Kong stock market. We find that IPOs with high investor demand realize large positive initial returns but negative long-run excess returns, while IPOs with low investor demand realize negative initial returns but positive long-run excess returns. This result suggests that (1) pre-offering demand for IPOs is at least partly driven by investors' over- or underreactions to information about firms' post-issuance prospects, and (2) while high- and low-demand IPOs are not priced at their intrinsic values in early aftermarket trading, eventually their true values are reflected in their pricing.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:18:y:2008:i:2:p:176-190

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