Title: Would various benchmark measurements affect abnormal return performances of IPO? Evidence from Taiwan's IPO market

Authors: Ming-Yuan Leon Li

Addresses: Department of Accountancy, Graduate Institute of Finance and Banking, National Cheng Kung University, No: 1, Ta-Hsueh Road, Tainan 701, Taiwan.

Abstract: This paper tries to answer the question: would the initial/long-run returns IPO significantly differ when various alternative measurements of market portfolio are adopted? Briefly, this study states that various methodologies for market returns might correspond to different magnitudes of abnormal returns of IPO. The aforementioned hypothesis is tested in Taiwan|s high-tech IPO market. Our empirical findings are consistent with the following notions. Firstly, various methodologies of market portfolio benchmark perform significant effects on the magnitudes of the long-run abnormal returns of IPO, but not for the initial abnormal returns of IPO. Secondly, by using the purging and value-weighted market-adjusted returns as a standard, the use of non-purging (equally weighted) benchmark will underestimate (overestimate) the poor long-run IPO|s return.

Keywords: initial public offering; abnormal returns; benchmark portfolio; IPO honeymoon period; Taiwan; market returns.

DOI: 10.1504/IJBPM.2008.015919

International Journal of Business Performance Management, 2008 Vol.10 No.1, pp.30 - 38

Published online: 02 Dec 2007 *

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