Byoung-Hyoun Hwang
MS2012

IPOs as Lotteries: Skewness Preference and First-Day Returns

T. Clifton Green and Byoung-Hyoun Hwang

Management Science 58, 432-444

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In one sentence

Investors appear to treat IPOs like lotteries. This can cause temporary IPO overpricing and poor long-run performance.

Summary

We find evidence that IPOs with greater upside potential have significantly higher first-day returns; in the long run, these IPOs significantly underperform.

Data, code & appendices

Please check out the SAS code under "Code and Data" to reproduce our main results.

Research topics

IPOslottery preferenceskewnessfirst-day returns