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Initial returns: underpricing or overvaluation ? Evidence from easdaq and euronm

Author

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  • Sophie Manigart
  • Wouter De Maeseneire

    (Vlerick Leuven Gent Management School)

Abstract

This paper investigates initial returns of Easdaq and EuroNM IPOs and explains part of these returns. Average first day return of 300 IPOs introduced before October 1, 1999, is 36.01 %. The most significant explanatory variable is the mean return of previous IPOs, indicating that high initial returns are caused by too high first trading prices due to investor overreaction and positive market sentiment. Riskier IPOs present substantially higher initial returns. Venture capitalists are not able to significantly reduce initial returns, nor does size of the IPO influence initial returns. Our results indicate that high initial returns are caused by underpricing as well as overvaluation.

Suggested Citation

  • Sophie Manigart & Wouter De Maeseneire, 2003. "Initial returns: underpricing or overvaluation ? Evidence from easdaq and euronm," Vlerick Leuven Gent Management School Working Paper Series 2003-11, Vlerick Leuven Gent Management School.
  • Handle: RePEc:vlg:vlgwps:2003-11
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    Cited by:

    1. D. Van den Poel, 2003. "Predicting Mail-Order Repeat Buying. Which Variables Matter?," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(3), pages 371-404.
    2. Valérie Revest & Alessandro Sapio, 2012. "Financing technology-based small firms in Europe: what do we know?," Small Business Economics, Springer, vol. 39(1), pages 179-205, July.
    3. Stolpe, Michael, 2003. "Learning and signalling in the French and German venture capital industries," Kiel Working Papers 1156, Kiel Institute for the World Economy (IfW).

    More about this item

    Keywords

    underpricing; investor sentiment; IPOs; initial returns;
    All these keywords.

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