Risk and Return Performance of IPOs : An Analysis
DOI:
https://doi.org/10.17010/ijrcm/2017/v4/i2/116089Keywords:
Initial Public Offerings
, Fixed Price Method, Book Building Method, Risk Analysis, Investment Decisions, Portfolio, Under-Pricing, OverpricingG1
, G110, G170, O16Paper Submission Date
, February 18, 2017, Paper sent back for Revision, March 9, Paper Acceptance Date, May 29, 2017.Abstract
Initial public offering (IPO) refers to the sale of new shares in the primary market for the first time to the general public. This study collected IPOs that are listed on the National Stock Exchange. This study focused on the IPO price performance, whether it was overpriced or underpriced. The IPO price performance was calculated by IPOs' post listing data. The IPOs recorded positive returns or negative returns during the study period from January 1, 2014 to November 4, 2015. This study evaluated the IPO risks and return performance by using three different measures, that is, Sharpe's, Treynor's, and Jensen's alpha measures. It also tried to keep an eye on the market index performance during the study period. In this study, it was found that the IPOs were underpriced and the three models also showed superior return performance of IPOs than the market index performance. The investors earned profits from their rational IPO investment decisions. Due to the over-performance of IPOs and risk return analysis, it was concluded that the investments in IPOs was less risky than the benchmark index's performance in the study period.Downloads
Downloads
Published
How to Cite
Issue
Section
References
Adams, M., Thornton, B., & Hall, G. (2008). IPO pricing phenomena: Empirical evidence of behavioral biases. Journal of Business & Economics Research, 6 (4), 67-74.
Bansal, R., & Khanna, A. (2012). Determinants of IPOs initial return: Extreme analysis of Indian market. Journal of Financial Risk Management, 1(4), 68 - 74. doi: 10.4236/jfrm.2012.14012
Bhanu Murthy, K.V., & Singh, A. K. (2008). IPO market: Under-pricing or overpricing ? Retrieved from http://www.igidr.ac.in/conf/money/mfc-12/Amit_bhanu_IPO%20Market.pdf
Chatzinas, G. C., Markopoulou, M. K., & Papadopoulos, D. L. (2009). Initial public offerings under-pricing in Greek Stock Exchange of Athens. Investment Management and Financial Innovations, 6 (3), 254 - 263.
Jindal, M., & Chander, R. (2015). Analyzing investors rationality for IPOs using meta analyses and forest plots in Neyeloff et al. (2012) framework: An investigation. Asia Pacific Journal of Management Research and Innovation, 11(1), 9-15.
Jindal, M. (2015). Short run IPO performance: An analysis. International Journal of Management, IT and Engineering, 5 (3), 13 - 34.
Joshi, Y. C., Sabhaya, R., & Pandya, F. H. (2013). Are IPOs underpriced? Empirical evidence from India. Pacific Business Review International, 6 (6), 80 - 89.
Mauskar, V., & Sivasubramaniam, T. A. (2011). Initial public offerings (IPO) & the under-pricing phenomena. AMET Journal of Management, 2 (1), 61- 69.
Pande, A., & Vaidyanathan, R. (2015). A study of initial public offerings on the National Stock Exchange of India. Retrieved from http://www.researchgate.net/profile/ Alok_Pande/publications
Peng, L. (2008). Empirical study on the performance of initial public offerings in China. Journal of Services Sciences and Management, 1, 135-142.
Sadaqat, S., Akhtar, M. F., & Ali, K. (2011). An analysis on the performance of IPO : A Study on the Karachi Stock Exchange of Pakistan. International Journal of Business and Social Science, 2 (6), 275 - 285.
Sohail, M. K., & Raheman, A. (2010). Examining the short-run IPOs performance in state of economy: Normal, boom & recession. International Research Journal of Finance and Economics, 35, 173-186.
Zouari, S. B. S, Boudriga, A., & Taktak, N. B. (2011). Determinants of IPO under-pricing: Evidence from Tunisia. The International Journal of Business and Finance Research, 5 (1), 13 - 32.
