An Examination of IPO Secondary Market Returns

Posted: 10 Jun 2011

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

John Gonas

Belmont University

Michael J. Highfield

Mississippi State University - Department of Finance and Economics

Kenneth Roskelley

Mississippi State University - Department of Finance & Economics

Date Written: 2009

Abstract

IPO stock prices increased approximately 2.3% on the first day of secondary market trading over the period 1993 through 2003. While these aftermarket returns are accentuated during 1999 and 2000, they persist after the bubble burst and even increase as a percentage of total underpricing. We explore several non-mutually exclusive hypotheses to explain our findings including price support, laddering, retail sentiment, and information asymmetry. Our results are most consistent with the view that higher secondary market returns accrue to IPOs with more information asymmetries possibly due to price and aggregate demand uncertainty.

Keywords: IPO secondary returns, Underpricing, Partial adjustment, Sentiment investors, Aggregate demand uncertainty

JEL Classification: G12, G14, G24

Suggested Citation

Bradley, Daniel and Gonas, John and Highfield, Michael J. and Roskelley, Kenneth, An Examination of IPO Secondary Market Returns (2009). Journal of Corporate Finance, Vol. 15, No. 3, 2009, Available at SSRN: https://ssrn.com/abstract=1861527

Daniel Bradley (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States

John Gonas

Belmont University ( email )

1900 Belmont Blvd.
Nashville, TN 37212-3757
United States

Michael J. Highfield

Mississippi State University - Department of Finance and Economics ( email )

Mississippi State, MS 39762
United States

HOME PAGE: http://misweb.cbi.msstate.edu/mhighfield

Kenneth Roskelley

Mississippi State University - Department of Finance & Economics ( email )

Mississippi State, MS 39762
United States
662-325-1979 (Phone)

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