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The new issues puzzle revisited: The role of firm quality in explaining IPO returns

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  • Blomkvist, Magnus
  • Korkeamäki, Timo
  • Pettersson, John

Abstract

We study the risk and return characteristics of IPOs for up to 60 months. After controlling for Asness et al. (2014) quality minus junk factor, IPOs outperform the benchmark portfolios. The previously-documented negative abnormal IPO returns may derive from inaccurate benchmarks.

Suggested Citation

  • Blomkvist, Magnus & Korkeamäki, Timo & Pettersson, John, 2017. "The new issues puzzle revisited: The role of firm quality in explaining IPO returns," Economics Letters, Elsevier, vol. 159(C), pages 88-91.
    • Handle: RePEc:eee:ecolet:v:159:y:2017:i:c:p:88-91
    DOI: 10.1016/j.econlet.2017.07.022
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    References listed on IDEAS

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    1. Lowry, Michelle, 2003. "Why does IPO volume fluctuate so much?," Journal of Financial Economics, Elsevier, vol. 67(1), pages 3-40, January.
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    6. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    7. Richard B. Carter & Frederick H. Dark & Ioannis V. Floros & Travis R. A. Sapp, 2011. "Characterizing the Risk of IPO Long‐Run Returns: The Impact of Momentum, Liquidity, Skewness, and Investment," Financial Management, Financial Management Association International, vol. 40(4), pages 1067-1086, December.
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    Cited by:

    1. Dorsaf Ben Aissia & Narjess Skhiri Hellara, 2019. "Systematic risk, the tradeoff of leverage and IPO first-day returns," Review of Quantitative Finance and Accounting, Springer, vol. 53(1), pages 239-256, July.

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    More about this item

    Keywords

    IPOs; Long-run performance; Firm quality;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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