An initial public offering (IPO) represents a significant event in a firm’s lifecycle, marking the transition from being a privately held company to a publicly traded entity by offering its shares to the public for the first time. Several previous studies have shown that, from an investor point of view, IPOs posits the opportunity to earn substantial return, and that they also tend to underperform long-term. In recent years, stock market volatility has fluctuated considerably due to factors such as the global pandemic and geopolitical conflicts. These factors have led to varying stock market returns, affecting individuals' savings. Additionally, the number of investors in Sweden has grown substantially over the past decade. This, combined with the relatively unexplored nature of market volatility in IPO research, has laid the foundation for this study's focus. Therefore, the purpose of this study is to assess the impact market volatility has on the initial return and the long-term risk-adjusted return of IPOs in Sweden. To fulfill this purpose, analyses have been undertaken to investigate the relationship between IPO short- and long-term returns and market volatility between 2019 and 2022. This timeframe encapsulates two years experiencing low market volatility (2019 and 2021), and two years experiencing higher market volatility (2020 and 2022). The data sample consists of 165 firms when measuring short-term returns, and 162 firms when measuring long-term returns, who have all had their IPO within this timeframe and are all listed on the Swedish stock market. To further contribute to the literature, the study incorporates the Efficient Market Hypothesis (EMH), Prospect Theory, and the Winner´s Curse Theory. These are three well-established and contrasting theories within IPO research which are introduced to see how well their perspectives align with the study's findings. The empirical results from the statistical analyses showed varied outcomes. While a statistically significant difference could be identified between certain years, the majority did not. Since the majority of the tests conducted could not find a significant difference in return between high and low volatile years, market volatility at the time of an IPO does not significantly influence the return. Consequently, the findings suggest that employing an investment strategy that involves investing in IPOs based on market volatility levels is not superior to other strategies. These findings give investors deeper insights into how IPOs and their timing are influenced by market conditions and can therefore aid them in making more informed decisions.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:umu-226553 |
| Date | January 2024 |
| Creators | Vigren, Oskar, Åsberg, Jacob |
| Publisher | Umeå universitet, Företagsekonomi |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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