Investor Demand for Ipos and Aftermarket Performance : Evidence from the Hong Kong Stock Market

In this study, we examine the relationship between investor demand for IPOs prior to offerings and aftermarket performance of IPO firms during the period from 1993 to 1997 in the Hong Kong stock market. The paper finds that IPOs with high investor demand have large positive initial returns but negative longer-run excess returns, while IPOs with low investor demand have negative initial returns but positive longer-run excess returns. The paper demonstrates that investor demand for IPOs is largely driven by investor over-optimistic and over-pessimistic reaction to the information about the IPO's prospects prior to offerings