TY - JOUR
T1 - Sentiment Traders & IPO Initial Returns: The Indian Evidence
AU - Clarke, J.
AU - Khurshed, Arif
AU - Pande, A.
AU - Singh, Ajai
PY - 2016/4
Y1 - 2016/4
N2 - We use India’s unique regulatory design to test sentiment-based models of IPO initial returns. Using a sample of 362 Indian offerings from 2003-2014, we find that the traditional measure of IPO underpricing averages 23%. We decompose the traditional underpricing measure into two components: one related to voluntary underpricing by the underwriter and the other component related to the IPO’s first-day trading activity. We find minimal levels of voluntary underpricing. However, initial returns on the first day average 14% and are primarily driven by the unmet demand of non-institutional investor groups. Overall, our results support sentiment-based models of IPO initial returns.
AB - We use India’s unique regulatory design to test sentiment-based models of IPO initial returns. Using a sample of 362 Indian offerings from 2003-2014, we find that the traditional measure of IPO underpricing averages 23%. We decompose the traditional underpricing measure into two components: one related to voluntary underpricing by the underwriter and the other component related to the IPO’s first-day trading activity. We find minimal levels of voluntary underpricing. However, initial returns on the first day average 14% and are primarily driven by the unmet demand of non-institutional investor groups. Overall, our results support sentiment-based models of IPO initial returns.
UR - https://www.scopus.com/pages/publications/84958581051
U2 - 10.1016/j.jcorpfin.2015.10.007
DO - 10.1016/j.jcorpfin.2015.10.007
M3 - Article
SN - 0929-1199
VL - 37
SP - 24
EP - 37
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
ER -