Economics at your fingertips  

Heterogeneous relationship between IPO return and risk across idiosyncratic variance characteristics

Nancy Beneda and Yilei Zhang

The Quarterly Review of Economics and Finance, 2009, vol. 49, issue 4, 1298-1316

Abstract: This paper analyzes the levels and changes in the post-IPO stock return volatility and provides insights into market responses to the presence of firm-specific risk. First, we document a negative relation between initial idiosyncratic volatility level and the post-IPO volatility change in that initially low volatility firms have more volatility increase and vice verse. This evidence suggests fundamental firm-specific changes after the IPO. Further, we find that underpricing and short-run post-IPO returns are positively related to the initial and corresponding idiosyncratic risk level. This finding suggests that underpricing compensates investors for acquiring costly information and firm-specific risk information is being incorporated into offer prices. Finally, we find that higher long-run post-IPO performance is related to both lower initial risk level and decreasing risk in the first year after the IPO.

Keywords: Initial; public; offering; Idiosyncratic; risk; Variance; ratio; test; IPO; underpricing; Long-run; performance (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Series data maintained by Dana Niculescu ().

Page updated 2017-09-29
Handle: RePEc:eee:quaeco:v:49:y:2009:i:4:p:1298-1316