This paper examines the impact of individual investors’ pre-market and aftermarket sentiment on initial public offering (IPO) stock returns, based on 382 IPO firms in the Korean stock market from 2007 to 2014. The results indicate that individual investors’ pre-market sentiment is significantly and positively related to the initial returns initial returns, as measured by the difference between the offer price and the first-day opening price. The findings also indicate that individual investors’ pre-market sentiment is positively associated with their aftermarket sentiment, implying a spillover effect from pre-market to aftermarket sentiment. However, after high initial returns in IPO firms with individual investors’ high premarket sentiment, we find subsequent underperformance; this is more pronounced in firms with high pre-market and aftermarket sentiment. Overall, our results imply that individual investors’ pre-market sentiment can largely explain IPO stocks’ high initial returns. Additionally, pre-market sentiment followed by aftermarket sentiment can account for IPO stocks’ underperformance. Nevertheless, the impact of individual investor sentiment on IPO stock returns seems to be a short-term phenomenon, as high initial returns and subsequent underperformance are more pronounced within the first month from the IPO.
Keywords: Individual Investor; Pre-market Sentiment; Aftermarket Sentiment; IPO Stock Returns; Korean Stock Market
JEL Classification: G14, G15, G30
학술대회/행사
학술대회 및 야외답사
학술대회/행사
[2016년 제 4차] Individual Investor Sentiment and IPO Stock Returns
작성자 : 관리자
조회수 : 1260
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2016-12-21
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