A REVIEW OF INITIAL PUBLIC OFFERING (IPO) MARKET PERFORMANCE

Abstract

To identify the appropriate market performance measures and prediction models for the emerging markets, this study first reviews the past literature on IPO market performance. The market performance has been analysed in two aspects; the initial or short-term market performance and the long-run market performance. The initial market performance is a universal phenomenon and it is measured by raw returns and excess returns. The longrun IPO performance was mainly analysed under the two approaches; event-time approach and calendar-time approach. In the event-time approach, the cumulative abnormal return, average raw return, buy-and-hold return, and wealth relatives are used to measure the long-run performance. The Capital Assets Pricing Model, Fama-French model and indices are the main measures that were employed under the calendar-time approach. Research on the long run-performance of IPOs is not yet developed compared to the initial market performance. Findings of the emerging market studies show a contradicting result on the long-run performance compared to the developed market studies. The conflicting results on IPO market performance for emerging markets are identified due to different methodologies, samples, benchmarks and time period. The finding indicates that further investigation is needed to measure IPO market performance in emerging markets.

Key Words: IPO, Market Performance, Emerging Markets

for full paper : fmscresearch@sjp.ac.lk