Abstract
In this chapter, the authors investigate the initial public offering (IPO) first-day returns. Based on 254 French IPOs performed between 2006 and 2011, they evaluate short-term market performance, and they identify whether French IPOs are underpriced (outperformance) or overpriced (underperformance) in the short term. The positive and negative returns of short-term IPOs are used to measure underpricing and overpricing. SECON's analysis indicates that IPOs are too expensive at 1.55% for MAR and 1.54% for RR. Secondary market analysis can be useful to investors because the high returns from the first day on the primary market are due to the lack of information and speculative behaviour of investors. Finally. industry sector IPOs are underpriced in MAR of 68.01% in the primary market and 75.30% in the overall market. These are the highest levels of underpricing compared to other sectors.
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