Hot And Cold Ipo Markets

Hot and cold ipo markets

Hot and cold ipo markets

Hot and Cold IPO Markets: Identification Using a Regime Switching Model

34 PagesPosted: 8 Jul 2015

Date Written: July 7, 2015


The market for unseasoned equity has the unusual and distinguishing feature of periods of concentrated activity in terms of both volume and underpricing.

This paper formally documents the existence of such periods using a regime-switching model that dates transitions between hot and cold states. A number of hot periods are identified over a 20-year period using a variety of IPO activity measures that capture different aspects of new issue volume, proceeds and underpricing.

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The study further documents a leading relationship between underpricing and IPO volume of up to six months. This relationship supports the contention that the decision to issue is a function of current underpricing. Various reasons are hypothesised for this result and the paper finds supportive evidence through a VAR analysis that reveals the influence of stock market and business conditions.

Hot and cold ipo markets

Keywords: hot issues; IPOs; regime-switching; stock market; unseasoned issues

JEL Classification: G12, G14, G32

Suggested Citation:Suggested Citation

Brailsford, Timothy and Heaney, Richard and Powell, John and Jing, Shi, Hot and Cold IPO Markets: Identification Using a Regime Switching Model (July 7, 2015). Multinational Finance Journal, Vol.

4, No.

Hot and cold ipo markets

1/2, p. 35-68, 2000. Available at SSRN:

Are Tunisian and Egyptian Share IPO Markets Hot or Cold AEFR 72 133 151new