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Contribution Details

Type Bachelor's Thesis
Scope Discipline-based scholarship
Title The stock market performance of IPOs in Switzerland from 2000 to 2018
Organization Unit
  • Prabaashan Selvarajah
  • Mojtaba Hayati
  • Felix Kübler
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Date 2022
Abstract Text This study examines the short-term, medium-term, and long-term performance of Swiss initial public offerings (IPOs) from 2000 to 2018. After the first day of trading, the IPOs outperform an industry-based benchmark by 5.80% on average. But over the medium and long term, there is a significant underperformance of -10.71% and -14.70% if the outliers of the sample are extracted. After three years (defined here as “long term”) in particular, the results contradict previous findings on Swiss IPOs. This can be attributed either to the outliers that have been removed such as the company EFG Financial Products Holding AG which had a three-year outperformance of 1057.57%, or to methodological issues. It is interesting to see that there is an outperformance across all periods if these outliers are included. While such results are no longer statistically significant, they imply that an investor who participated in every Swiss IPO from 2000 to 2018 equally and sold the shares after three years would have outperformed a Swiss industry-based benchmark. To understand which factors in the IPO process can cause a certain performance pattern afterwards, the public offerings are categorized according to age, size, underpricing, underwriter reputation, IPO volume, and industry. The performance of each subdivision is then analysed over a period of one day, one month, six months, one year, and three years, respectively, and compared to an index that is matched to the corresponding industry of the firm going public. The findings show similar results for four of these categories: age, underwriter reputation, IPO volume, and industry. That is, high benchmark-adjusted returns on the first day result in an underperformance after three years for IPOs which are considered riskier. On the other hand, the other two factors of size and underpricing do not follow this pattern. They record a different relationship where a high adjusted first-day return leads to an even higher long-term adjusted performance. Thus, it can be concluded that size and underpricing are not reliable proxies for ex-ante uncertainty.
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