International Journal of Financial Management

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An Empirical Investigation of Short-Run Performance of Ipos in India


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1 Lecturer, Delhi Institute of Advanced Studies, Rohini, Delhi, India
     

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Initial Public Offering (IPO), is a way for companies to go public and meet its financing needs. IPOs are known to provide the initial abnormal returns to its investors. Therefore, this present paper is analyzing the short-run market adjusted performance of 100 IPOs listed on National Stock Exchange (NSE) from the period April 2008 to March 2011(3 years). This study found that Indian IPO market provides positive abnormal return to investors on short-run basis (1st and 7th day) like as observed in past literature. The returns diminished at the end of 30th day showing the negative return. The average market adjusted return for the 1st, 7th and 30th day is 7.23%, 2.09%, and -8.58% respectively. T-Statistic has been used to know the significance of these market adjusted returns. The wealth relative model has also been applied for analyzing the short run performance of IPOs, which provided the same results. The wealth relative index is 1.07, 1.02 and .91 for 1st, 7th and 30th day respectively. The performance of IPOs on yearly basis has also been presented. The results confirm that year 2009-10 showed exceptional performance; that investors can earn 7.03%, 6.44% and 4.21% average return if they sell these stocks at the end of 1st, 7th and 30th day respectively.

Keywords

IPO, NSE, Market Adjusted Return, Short-run Performance, Under-pricing
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  • An Empirical Investigation of Short-Run Performance of Ipos in India

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Authors

Himanshu Puri
Lecturer, Delhi Institute of Advanced Studies, Rohini, Delhi, India

Abstract


Initial Public Offering (IPO), is a way for companies to go public and meet its financing needs. IPOs are known to provide the initial abnormal returns to its investors. Therefore, this present paper is analyzing the short-run market adjusted performance of 100 IPOs listed on National Stock Exchange (NSE) from the period April 2008 to March 2011(3 years). This study found that Indian IPO market provides positive abnormal return to investors on short-run basis (1st and 7th day) like as observed in past literature. The returns diminished at the end of 30th day showing the negative return. The average market adjusted return for the 1st, 7th and 30th day is 7.23%, 2.09%, and -8.58% respectively. T-Statistic has been used to know the significance of these market adjusted returns. The wealth relative model has also been applied for analyzing the short run performance of IPOs, which provided the same results. The wealth relative index is 1.07, 1.02 and .91 for 1st, 7th and 30th day respectively. The performance of IPOs on yearly basis has also been presented. The results confirm that year 2009-10 showed exceptional performance; that investors can earn 7.03%, 6.44% and 4.21% average return if they sell these stocks at the end of 1st, 7th and 30th day respectively.

Keywords


IPO, NSE, Market Adjusted Return, Short-run Performance, Under-pricing

References