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Hot IPOs can damage your long-run wealth!

Coakley, J and Hadass, L and Wood, A (2008) 'Hot IPOs can damage your long-run wealth!' Applied Financial Economics, 18 (14). 1111 - 1120. ISSN 0960-3107

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This article investigates the links between hot markets, venture capital and long-run underperformance using a unique sample of 591 UK IPOs 1985-2003. It finds no evidence for long-run underperformance for the full sample in line with the classical position. However, cumulative abnormal returns are significantly negative in hot markets and the return differential between hot and normal markets is also statistically and economically significant. This return differential holds relative both to the initial period closing price and the offer price and is consistent with issuers using market timing to exploit investor sentiment during hot markets. Finally, the results offer no support for a certification role by venture capitalists.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Jim Jamieson
Date Deposited: 18 Dec 2012 11:15
Last Modified: 02 Mar 2018 16:15

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