IPOs Hot & Cold Markets
Quarterly Journal of Securities Exchange

Quarterly Journal of Securities Exchange

IPOs Hot & Cold Markets

Document Type : Original Article

Authors
Maryam Davallou
elham Moslemi
10.22034/jse.2017.11110
Abstract
The aim of this study is to assess the characteristics of hot and cold IPO markets in Tehran Stock Exchange. To examin the hypotheses, logit regression and multiple linear regression are used. The sample of the study consists of 118 TSE’s listed companies which have been offered initially during 2001-2013. The results reveal that there is no meaningful relation between hot issue and underpricing. The findings indicate a reverse relation between hot issue and market performance before IPO and a direct relation between risk of IPOs and hot issue. The results exhibit, although the hot issue phenomenon is not related to underpricing, a lead-lag relation between underpricing and hot issue can be understood and it shows a relation between high initial return and the future IPO volume. Additionally, the study concludes that companies which are offered in hot markets, are more risky and underperformance. Moreover, the cross sectional variance in long run abnormal returns is lower for firms going public in hot market. Finally, the findings of the study are sensitive toward the definition of hot issue.
Keywords
Changing Risk Composition Hypothesis
Hot Issue Markets
Initial Public Offerings
Market Timing Hypothesis
Underpricing
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