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Subscription Rate and Volatility

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  • Seshadev Sahoo

Abstract

This article investigates the relationship between subscription rate and aftermarket volatility for IPOs issued in India during the period 2002–12. The empirical findings corroborate the evidence that subscription rate is a good indicator of aftermarket volatility for the IPO stocks. This study also finds that retail subscription rate is relatively more significant and powerful in predicting volatility than institutional investors. Surprisingly, offer size, investment bank prestige and debt–equity ratio is insignificant in explaining aftermarket volatility. The outcome can be used by the market participants to understand the potential fluctuations in the prices. This article also evaluates volatility of the IPO stocks on listing day. JEL Classification: G12

Suggested Citation

  • Seshadev Sahoo, 2015. "Subscription Rate and Volatility," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 14(1), pages 20-58, April.
    • Handle: RePEc:sae:emffin:v:14:y:2015:i:1:p:20-58
    DOI: 10.1177/0972652714567995
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    More about this item

    Keywords

    IPO; subscription rate; volatility; underpricing; IPO firm P/E; book value; post-issue promoter group retention; investment bank prestige; offer size; age of the firm;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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