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Do IPOs outperform Treasury bills?

Author

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  • Huang, Gow-Cheng
  • Liano, Kartono
  • Pan, Ming-Shiun

Abstract

The majority of stocks that went public during 1975–2020 do not outperform one-month T-bills. Only 38.65% of the IPOs have a lifetime buy-and-hold return higher than T-bills. In terms of creating wealth for shareholders, the top 365 performing IPO firms (3.23% of the total) account for 100% of the total net wealth creation. The remaining 10,947 IPO firms (96.77%) collectively earn the risk-free rate in their lifetimes. Consequently, the wealth creation in the IPO market is highly concentrated in relatively few top-performing IPO firms.

Suggested Citation

  • Huang, Gow-Cheng & Liano, Kartono & Pan, Ming-Shiun, 2022. "Do IPOs outperform Treasury bills?," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005481
    DOI: 10.1016/j.frl.2021.102610
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    References listed on IDEAS

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    1. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
    2. Fang, Jiali & Marshall, Ben R. & Nguyen, Nhut H. & Visaltanachoti, Nuttawat, 2021. "Do stocks outperform treasury bills in international markets?," Finance Research Letters, Elsevier, vol. 40(C).
    3. Ritter, Jay R, 1991. "The Long-run Performance of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(1), pages 3-27, March.
    4. Bessembinder, Hendrik, 2018. "Do stocks outperform Treasury bills?," Journal of Financial Economics, Elsevier, vol. 129(3), pages 440-457.
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