Context‐specific experience and institutional investors’ performance

Suman Neupane, Chandra Thapa and Kulunu Vithanage

Journal of Banking & Finance, 2023, vol. 149, issue C

Abstract: We examine how context-specific experience is correlated with the performance of institutional investors. Specifically, we explore how previous initial public offering (IPO) trading experience affects foreign institutional investors’ selection, bidding, and the profitability of their future IPO investments. We find that investors who participate more frequently (i.e., those with more context-specific experience) exhibit different behaviors from those who participate less frequently. After controlling for investor fixed effects and time-varying heterogeneity, we find that only high-frequency investors improve their profitability over time by appropriately varying their subscriptions across IPOs. The effect of context-specific experience also appears to dominate other forms of general investment experience.

Keywords: Learning; Experience; Foreign institutional investors; IPOs (search for similar items in EconPapers)
JEL-codes: G11 G23 J24 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:149:y:2023:i:c:s0378426623000225

DOI: 10.1016/j.jbankfin.2023.106786

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