Abstract
The authors examine the post-listing performance of new issues on the JSE. On the basis of an empirical study conducted over the 1975-1986 period, evidence is presented indicating that abnormal returns do occur during the post-listing period. The existence of hot and cold issue periods are also found to be evident on the JSE and the performance in the aftermarket is found to differ substantially in these periods. In hot issue periods abnormal returns are found in almost the entire 12-month period subsequent to listing, with excess returns reaching as much as 7% per month during the subsequent year. The results for cold issue periods by contrast reveal abnormal returns only up to the first three months after issue, whereafter substantially negative returns occur in several subsequent months. Significant positive relationships were also evident between the opening premia and some important behavioural characteristics in the aftermarket, namely, abnormal returns one year after issue and volumes traded in the aftermarket.
Highlights
Evidence has come to the fore which reveals that unseasoned equity issues have exhibited a substantial opening premia relative to their issue price
Barlow & Sparks (1986) presented evidence suggesting that opening premia on the Johannesburg Stock Exchange (JSE) in particular, have been substantially larger than those in the UK, USA, France and Japan
The first section of this paper reviews the results of relevant studies conducted on the London Stock Exchange (LSE), the New York Stock Exchange (NYSE) and the JSE
Summary
Evidence has come to the fore which reveals that unseasoned equity issues (commonly referred to as new listings) have exhibited a substantial opening premia relative to their issue price. Barlow & Sparks (1986) presented evidence suggesting that opening premia on the Johannesburg Stock Exchange (JSE) in particular, have been substantially larger than those in the UK, USA, France and Japan. Barlow & Sparks (1986) presented evidence suggesting that opening premia on the Johannesburg Stock Exchange (JSE) in particular, have been substantially larger than those in the UK, USA, France and Japan. Evidence has come to the fore which reveals that unseasoned equity issues (commonly referred to as new listings) have exhibited a substantial opening premia relative to their issue price. It is not clear whether these equities on the JSE continue to exhibit superior excess returns in the short to medium post-listing period, or whether price adjustment is rapid. This paper investigates the post-listing performance of new listings on the JSE over the period 1975-1986.
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