Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/46583 
Year of Publication: 
2006
Series/Report no.: 
Internetökonomie und Hybridität No. 36
Publisher: 
Westfälische Wilhelms-Universität Münster, European Research Center for Information Systems (ERCIS), Münster
Abstract: 
We analyse the performance of simple investment strategies in IPOs based on a large sample of IPOs in Germany between 1985 and 2002. In particular, we compare the performance of the following strategies: Invest equally weighted in each IPO, invest market value weighted in each IPO, invest in an equally weighted portfolio of recent IPOs or invest in a value weighted portfolio of recent IPOs. We find that investors pursuing the first two investment strategies would realise significantly negative abnormal returns on average. In contrast, applying a bootstrapping procedure, we find that investing according to the latter two investment strategies does not yield significant underperformance. The difference in performance among investment strategies points to the phenomenon that firms going public in hot IPO markets perform worse than those going public in cold markets. We analyse to what extent this phenomenon can be attributed to pseudo market timing. Based on simulations, our results indicate that pseudo market timing can partly explain the performance of IPO investment strategies between 1996 and 2002.
JEL: 
G10
G11
G14
Document Type: 
Working Paper

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