IDEAS home Printed from
   My bibliography  Save this article

IPO First-Day Return and Ex Ante Equity Premium


  • Guo, Hui


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.

Suggested Citation

  • Guo, Hui, 2011. "IPO First-Day Return and Ex Ante Equity Premium," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(03), pages 871-905, June.
  • Handle: RePEc:cup:jfinqa:v:46:y:2011:i:03:p:871-905_00

    Download full text from publisher

    File URL:
    File Function: link to article abstract page
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Liu, Jia & Lister, Roger & Pang, Dong, 2013. "Corporate evolution following initial public offerings in China: A life-course approach," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 1-20.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:46:y:2011:i:03:p:871-905_00. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.