Investor sentiment and IPO pricing: Market: Evidence from India

Abstract

The present paper aims at understanding the variability in IPO volume and initial return in Indian capital market. In order to see whether the IPOs were timed with the favourable market or not the market was divided into the hot and cold market, defined on the basis of the monthly IPO volume. Then the relationship between market type and total proceeds was established with the help of a multivariate regression model with the idea that any timing attempt should be reflected in the activity of issuance of equity. The result based on multivariate regression suggest that Market timers, identified as firms that go public when the market is hot, tried to maximize the total proceeds at the time of IPO. The hot-market effect is remarkably robust; it is significant for both firm and industry-level characteristics