I am grateful to an anonymous referee for very helpful and constructive comments and suggestions. This paper has also been benefited from the comments of Kalok Chan and participants of the Asian FA–NFA 2008 International Conference. Financial support from Hong Kong Polytechnic University (project account code G-U310) is gratefully acknowledged. Any errors are my own.
Retail Trading and IPO Returns in the Aftermarket
Article first published online: 6 DEC 2010
© 2010 Financial Management Association International
Volume 39, Issue 4, pages 1475–1495, Winter 2010
How to Cite
Chan, Y.-C. (2010), Retail Trading and IPO Returns in the Aftermarket. Financial Management, 39: 1475–1495. doi: 10.1111/j.1755-053X.2010.01119.x
- Issue published online: 6 DEC 2010
- Article first published online: 6 DEC 2010
Using trade size from the Trade and Quote (TAQ) data set as a proxy for individual versus institutional trading, this paper finds that the effects of trading of these two types of investors on initial public offering (IPO) returns on the first trading day depend on the hotness of the IPO. My regression results reveal that IPOs’ open-to-close returns are positively related to small trade participation, small trade purchases, and small trade order imbalance in the hot IPO sample, but not in the cold and neutral IPO samples. In addition, the aftermarket prices of cold and neutral IPOs are primarily driven by the trading of institutional investors, who are less likely to be driven by sentiment.