The Really Long-Run Performance of Initial Public Offerings: The Pre-Nasdaq Evidence


  • Paul A. Gompers,

  • Josh Lerner

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    • Paul A. Gompers and Josh Lerner are from Harvard University and the NBER. We thank Ken French for providing access to the historical size and book-to-market breakpoints, portfolio returns, and factor returns. Malcolm Baker, Gene Fama, Ken French, Rick Green, Andrew Metrick, Jay Ritter, Andrei Shleifer, Jeff Wurgler, two anonymous referees, as well as participants in the NBER Corporate Finance program meeting and the Harvard Business School Entrepreneurship Conference provided helpful comments. Malcolm Baker, Matt Bluestone, Eugene DeAngelis, Gene Divolio, Amit Doshi, Vedica Jain, Jason Jun, Nik Johnston, Darpan Kalra, Mbago Kaniki, Flora Kim, Tom Knox, Neil Lawande, Ethan Lebowitz, and Eitan Levisohn provided excellent research assistance. Special thanks go to Girts Graudins and Eric Nierenberg for their outstanding contributions to this project. Harvard Business School's Division of Research provided financial support.


Financial economists have intensely debated the performance of IPOs using data after the formation of Nasdaq. This paper sheds light on this controversy by undertaking a large, out-of-sample study: We examine the performance for five years after listing of 3,661 U.S. IPOs from 1935 to 1972. The sample displays some underperformance when event-time buy-and-hold abnormal returns are used. The underperformance disappears, however, when cumulative abnormal returns are utilized. A calendar-time analysis shows that over the entire period, IPOs return as much as the market. The intercepts in CAPM and Fama–French regressions are insignificantly different from zero, suggesting no abnormal performance.