Abstract
The main aim of the study is to investigate the hot and cold issue market phenomena in Pakistan. In effect, this study examines IPOs underpricing and underperformance phenomena during hot and cold issue market on the Karachi Stock Exchange (KSE). The significant positive correlation between initial returns and IPO’s volume series confirms the existence of hot and cold issue market phenomena in KSE. The hot and cold periods are segregated on volume based method. The result found that hot market IPOs in the short-run shows on average greater underpricing (high returns) than cold issue market. However, hot market IPOs in long-run shows on average high underperformance (negative returns) than cold market IPOs. The result is consistent with the prediction of windows of opportunity hypothesis and signaling hypothesis.
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