Ibbotson (1975) founded the first year return of the IPO was on average above zero, however, there exist a negative performance in the following three years. He concluded a generally short term under-priced and a long term underperformance for the companies after going public.
Ritter (1991) documented the long-run performance of the initial public offering is typically under-perform the benchmark. Ritter studied the three year performance of US IPOs issued during 1975-84 and argues the under-price of the IPO only exist in a short period and disappear quickly after the first trading day, for companies with similar size, and in the same industries, the three year performance after going public are significantly below the market.
Model to measure the return
Barber and Lyon (1997) had compared the methods in measuring the abnormal return of the stocks. Since Ritter (1991) first argued that the cumulating abnor...
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- Conducting a risk and return analysis requires a clear understanding of what risk and return is and how it relates to the financial sector and investments. There is a strong relationship between risk and return. Risk and return is basically a trade-off for an investor weighing their options based on the risk of an investment and the potential return of said investment. I equate the definition to something pretty simple but obviously there is more too it. Think of a casino slot machine. The higher the bet, the higher the reward.... [tags: Investment, Finance, Bond, Stock]
1038 words (3 pages)
- The primary aim of this report is to critically investigate the initial return of nonfinancial Initial Public Offerings (IPOs) that went public on the London Alternative Investment Market (AIM) between the period of January 2005 and December 2014. An IPO is an offering of shares to the public, where new shares are sold to raise cash for the firm (Allen, F., Brealey, R and Myers, S (2010)) The market attracts mainly small and medium companies because the listing requirements are less restrictive than the London Stock Exchange (LSE).... [tags: Initial public offering, Stock market]
954 words (2.7 pages)
- Money Management: ARPS – An investment with low risk and high return Ordinarily risk and return go together. Those seeking higher returns on their investments, usually must take on additional risk as the cost of (hopefully) receiving them. Similarly, as we were all told as youths, when something seems too good to be true — there is often a catch somewhere. From time to time, however, situations arise where astute investment managers are able to find opportunities that provide high return with low risk.... [tags: Investment, Finance, Rate of return, Stock]
786 words (2.2 pages)
- Current Market (Short-Term) This year, as indicated by Figure 1, IPO pricing in the United States has decreased from 275 in 2014 to 154 at the end of October 2015. This represents a 44% decrease. According to Renaissance Capital, “this year tech firms are set to make up their smallest share of the IPO market since 2008 (Demos).” The decrease relates to management seeking higher than expected of valuations in a loose market. As a result, investors are not willing to invest in above average valuations.... [tags: Finance, Stock, Stock market, Economics]
708 words (2 pages)
- XYZ Construction Inc. like many other organizations has outgrown its geographical boundaries and as a result the leadership team plans on expanding its horizontal construction nationally and internationally. du Plessis (2009) suggested that globalization and internationalization challenges are now demanding that organizational managers fine-tune or draft new policies and procedures to stay competitive in the global markets. As such, the leadership within XYZ Construction Inc. has also decided to transition from a private to a public ownership construct and launch its initial public offering (IPO).... [tags: Corporate Strategy]
1815 words (5.2 pages)
- Return on Investment (ROI) and Training Return on Investment (ROI) is the most recognized form of measure used by business to determine the worth of that business. Return on Investment is the analysis of total benefits minus the total cost divided by total cost multiplied by 100 to give you a percentage. This indicator then tells the organization if the investment was worthwhile. Trainers and training department use ROI as a justification for their existence. This paper will look at return on investment and what factors are used in the calculation of ROI by the trainers, training department and the organization, in turn by section, with a conclusion to end.... [tags: Rate of return, Investment, Profit, Costs]
1475 words (4.2 pages)
- Initial Public Offerings (IPO's) The term "IPO" slipped into everyday speech during the tech bull market of the late 1990s. Back then, it seemed you couldn't go a day without hearing about a dozen new dot-com millionaires in Silicon Valley cashing in on their latest IPO. The phenomenon spawned the term "siliconaire," which described the dot-com entrepreneurs in their early 20s and 30s who suddenly found themselves living large due to IPOs from their Internet companies. So, what is an IPO anyway.... [tags: e-commerce Internet IPO Essays]
1487 words (4.2 pages)
- The Role of the Heath in Hardy's Return of the Native "Nature is the most thrifty thing in the world; she never wastes anything; she undergoes change, but there is no annihilation, the essence remains - matter is eternal," philosophizes Horace Binney. Egdon Heath, in Thomas Hardy's Return of the Native, behaves as Nature does in this quotation -- it undergoes seasonal shifts, but its essential quality remains. The heath takes on the role of a static influence on the characters' relationships and circumstances, demonstrating the unchanging nature of human experience through its own seasonal shifts, but still unaltered essence of tragedy.... [tags: Return Native Essays]
1154 words (3.3 pages)
- The topic of IPO spinning is one that has not received much attention in the recent past. Amidst the recent financial crisis we have experienced the IPO market became relatively quiet. However, there is a large consensus that the IPO market may become much more active in the near future and it seems like an appropriate time to look at an issue that may again surface. We examined the article “A New Look at an Old Trick: IPO Spinning” from The Wall Street Journal. This article gives a brief outline of what IPO spinning is, a look at one of the more high profile cases of Frank Quattrone, and provides some evidence of the effects it has from a study by Xiaoding Liu and Jay Ritter.... [tags: Economics]
848 words (2.4 pages)
- Although it is a children's book, Ursula Le Guin's short story "Catwings Return" is a perfect example of the Fantastical genre. Published in 1989, "Catwings Return" has some elements similar to those found in Magical Realism, but the story mostly has elements of Fantasy in it. By examining the American story "Catwings Return," a reader will be able to see the similarities and differences between Magical Realism and Fantasy. In order to have some characteristics similar to those in Magical Realism, a text must contain both realistic elements and magical elements (Flores 112).... [tags: Catwings Return]
1387 words (4 pages)