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UK IPOs: Long Run Returns, Behavioural Timing and Pseudo Timing

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  • Alan Gregory
  • Cherif Guermat
  • Fawaz Al-Shawawreh

Abstract

In this paper we examine a comprehensive set of 2,499 UK IPOs launched between mid-1975 and the end of 2004. We find compelling evidence of long run under-performance that persists for between 36 and 60 months post-flotation, depending on the precise method chosen to measure abnormal returns. Following Schultz (2003) , we ask whether our results are consistent with 'pseudo-timing'. Equally-weighted returns in calendar time provide further evidence of under-performance, a result that favours the Loughran and Ritter (2000) behavioural timing hypothesis rather than the Schultz (2003) pseudo-timing hypothesis. However, we show that this under-performance is concentrated in AIM and USM stocks. When we measure value-weighted returns in calendar time we find that abnormal returns are not significantly different from zero. Further analysis shows that, consistent with the findings of other studies, IPO under-performance is concentrated in smaller firms. Copyright (c) 2010 Blackwell Publishing Ltd.

Suggested Citation

  • Alan Gregory & Cherif Guermat & Fawaz Al-Shawawreh, 2010. "UK IPOs: Long Run Returns, Behavioural Timing and Pseudo Timing," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(5-6), pages 612-647.
  • Handle: RePEc:bla:jbfnac:v:37:y:2010-06:i:5-6:p:612-647
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    References listed on IDEAS

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    Cited by:

    1. Valérie Revest & Alessandro Sapio, 2016. "Graduation and sell-out strategies in the Alternative Investment Market," Discussion Papers 4_2016, CRISEI, University of Naples "Parthenope", Italy.
    2. Valerie Revest & Alessandro Sapio, 2016. "The creation function of a junior listing venue: An empirical test on the Alternative Investment Market," LEM Papers Series 2016/32, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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