Abstract
This paper tries to answer the question: would the initial/long-run returns IPO significantly differ when various alternative measurements of market portfolio are adopted? Briefly, this study states that various methodologies for market returns might correspond to different magnitudes of abnormal returns of IPO. The aforementioned hypothesis is tested in Taiwan's high-tech IPO market. Our empirical findings are consistent with the following notions. Firstly, various methodologies of market portfolio benchmark perform significant effects on the magnitudes of the long-run abnormal returns of IPO, but not for the initial abnormal returns of IPO. Secondly, by using the purging and value-weighted market-adjusted returns as a standard, the use of non-purging (equally weighted) benchmark will underestimate (overestimate) the poor long-run IPO's return.
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