Abstract
The complex networks approach has been gaining popularity in analysing investor behaviour and stock markets, but within this approach, initial public offerings (IPO) have barely been explored. We fill this gap in the literature by analysing investor clusters in the first two years after the IPO filing in the Helsinki Stock Exchange by using a statistically validated network method to infer investor links based on the co-occurrences of investors' trade timing for 69 IPO stocks. Our findings show that a rather large part of statistically similar network structures form in different securities and persist in time for mature and IPO companies. We also find evidence of institutional herding.
Highlights
Initial public offerings (IPOs) play an important role in financial markets because they open new investment opportunities, redistribute funds’ allocations and attract new investors to the market
It is crucial to understand the characteristics of the underlying investor behaviour patterns because these, when combined with their behaviours, shape the dynamics of the whole market and are important factors in explaining the booms and bubbles in the financial markets (Ranganathan et al, 2018)
Prior studies have investigated the structures of investor networks in different contexts (Ozsoylev et al, 2013; Tumminello et al, 2012; Gualdi et al, 2016; Musciotto et al, 2018; Ranganathan et al, 2018; Baltakys et al, 2018b), but investor clusters around IPOs have barely been explored
Summary
Initial public offerings (IPOs) play an important role in financial markets because they open new investment opportunities, redistribute funds’ allocations and attract new investors to the market. According to Ozsoylev et al (2013), information links can be identified from realised trades because investors who are directly linked in the information network tend to time their transactions . We follow this idea and use observations on investor-level transactions from shareholder registration data to identify the links between investors, here with a special focus on identifying investor clusters. Prior studies have investigated the structures of investor networks in different contexts (Ozsoylev et al, 2013; Tumminello et al, 2012; Gualdi et al, 2016; Musciotto et al, 2018; Ranganathan et al, 2018; Baltakys et al, 2018b), but investor clusters around IPOs have barely been explored
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