IS INITIAL RETURN WORTH THE COSTS OF RECEIVING IPO ALLOCATION?
Post by MSF Chula at Monday, 18 September 2017 02:30 PM

This study examines whether the initial returns from IPOs are worth the cost of receiving IPO allocation facing retail investors. The samples consist of 314 IPOs made in Thailand during the pe-riod between 2003 and 2015. The average and median initial returns are, respectively, 37.97% and 16.67% both are statistically significant. After accounting for the costs of receiving IPO allocation, however, the results show that the initial return from IPOs is smaller than the total costs incurred in order to receive an allocation. So, the retail investors are not able to recover these trading costs with superior returns from IPOs. Besides, these results also remain in spite of the hot issues. There is an evidence showing that market return could increase the net gain (the difference between initial re-turn and the trading costs), which results from the return on a well-diversified portfolio. Consistent-ly, the issue size also has a positive relationship to the net gain.

Last updated at Monday, 18 September 2017 02:30 PM