The Pricing Performance Puzzle of Initial Public Offerings (IPOS): Evidence from Indian IPO Market

Abstract

The introduction of the Book-building process fo r Initial Public offerings (IPOs) improved lPOs pricing & performances. This paper with a sample of24 lPOs attempts to study the long run & short run performances. Resu lts indicated 33% of the issue were under-priced. ln the short-run, they reported positive average Market Adju ted Abnormal Return (MAAR) of upto 42.85%. In the long run, using buy-and-hold ab normal retu rn (BHARs), the e IPOs significantly underperformed the market benchmark up to a period of 1 month from the date of listing and va ni h thereafter. The inve tors who buy at offer get po itive returns throughout the period, while the initial day traders are required to wait for more than 1 month to earn a minimal positive return.