What Determines Flipping Behaviour in an Emerging Market?

Abstract

This study explores the behaviour of initial public offerings (IPOs) investors in the immediate aftermarket. Specifically, this study investigates the role of investors’ heterogeneity of opinion and IPO initial return in determining their flipping activities in Malaysia. The results from the first model show that both IPO initial return and heterogeneity of opinion have a significant positive effect on flipping activities. Furthermore, the effect of heterogeneity of opinion is more pronounced than IPO initial return, which drives us to conclude that the former is the main explanatory variable of investors’ flipping activities in the immediate first-day aftermarket. The results of the second model show that most flipping activities happen when the price range is at its highest level in the secondary market. Finally, the study concludes that investors’ flipping activities in the Malaysian IPO market are driven by quick and riskless capital gains.