Short- and long-run performance of IPOs traded on the Istanbul Stock Exchange

Publisher Summary This chapter examines initial public offerings (IPOs) traded on the Istanbul Stock Exchange (ISE). The ISE is a well-disciplined milieu for all types of transparent and secured trading for both domestic and foreign investors, which has been confirmed by numerous qualifications granted to it by respected international organizations. The underpricing of Turkish IPO sectors grouped under three categories is examined. The returns of IPOs are calculated for different time periods to better visualize underpricing in the short, medium, and long term. The medium- and long-run returns of the stocks traded on the ISE were found to be more promising than the short-run returns, with the marketing sector attaining the highest returns. Chow's test is used to check for structural changes in the regression of stock returns over market returns using the Capital Asset Pricing Model (CAPM). Finally, cointegration relationships of the CAPM are investigated for several IPO returns and market returns. The cointegration relationships between the stock and market returns were investigated using EViews. Fortunately, such cointegration relations were found for the stocks representing their sectors. The coefficients reported offer further insight into observing the nature of the long-run relationship between stock and market returns.

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