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Investor demand for IPOs and aftermarket performance: Evidence from the Hong Kong stock market

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  • Agarwal, Sumit
  • Liu, Chunlin
  • Rhee, S. Ghon

Abstract

In this study, we examine the relation between pre-offering demand and aftermarket performance of IPO firms in the Hong Kong stock market. We find that IPOs with high investor demand realize large positive initial returns but negative long-run excess returns, while IPOs with low investor demand realize negative initial returns but positive long-run excess returns. This result suggests that (1) pre-offering demand for IPOs is at least partly driven by investors' over- or underreactions to information about firms' post-issuance prospects, and (2) while high- and low-demand IPOs are not priced at their intrinsic values in early aftermarket trading, eventually their true values are reflected in their pricing.

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  • Agarwal, Sumit & Liu, Chunlin & Rhee, S. Ghon, 2008. "Investor demand for IPOs and aftermarket performance: Evidence from the Hong Kong stock market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 176-190, April.
    • Handle: RePEc:eee:intfin:v:18:y:2008:i:2:p:176-190
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    References listed on IDEAS

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