RT Journal Article
SR Electronic
T1 The Role of Investor Sentiment in the<br/>IPO Aftermarket
JF The Journal of Investing
FD Institutional Investor Journals
SP 99
OP 110
DO 10.3905/joi.2012.21.4.099
VO 21
IS 4
A1 Sanjiv Jaggia
A1 Satish Thosar
YR 2012
UL https://pm-research.com/content/21/4/99.abstract
AB This article uses two price signals on the cusp of an IPO, price revision (change from pre-offer to offer price) and initial return (change from offer to market open price), as proxies of investor sentiment, which appears to have potent and lingering effects over a six-month aftermarket window. For instance, firms that rank high on our investor optimism scale exhibit considerable initial price momentum and sharp reversals. The article shows that a mechanical trading strategy designed to exploit aftermarket patterns generates economically significant risk-adjusted returns compared to a buy-andhold benchmark. Robustness checks indicate that it is important to implement the strategy as early as possible and the key driver is the serial dependence in aftermarket returns.TOPICS: Portfolio construction, equity portfolio management, passive strategies