25 Years of Dutch Ipos

Abstract

This study focuses on the existence of the initial underpricing and the long-term underperformance anomalies in the Dutch IPO market between 1977 and 2001, and whether the strength of these anomalies differs during hot and cold issue periods. We compared the performance of each IPO with its specific sector benchmark and found an average initial underpricing level of 17.6%. In the long run the performance of the total IPO sample does not differ from its benchmark. The period from 1997 until the beginning of 2000 was a true 'hot issue' period for IPOs in the main sector growth. Their level of initial underpricing was 35.8% compared to 9.2% uring 'cold issue' periods. These growth IPOs also significantly underperformed their benchmark by 38.4% after three years. This performance was significantly worse than that of growth IPOs in 'cold issue' periods.

Keywords: Dutch stock market, IPO, 'hot' and 'cold issue' periods, initial underpricing, long-term underperformance

JEL Classification: G12, G14, G24