Reliability and Validity by jizhen1947



          陳柏宇 Po Chen 9731810
   Motivation: People always wonder if the prices of IPO
    stocks are higher than it should be
   Objective: Examine the long run performance of IPO
    stocks in Taiwan
   Data: The prices of all IPO stocks in Taiwan from 2004
    to 2007
   Method
     For each IPO stock, compute the returns of each day
       by comparing the closing price on each day to the
       one on IPO day
     Comparison starting from IPO days to 3 year after
     Adjust the return by the index change of the
       corresponding market segment
International Empirical Results
                   Only 5 out of 23 have positive
                    long run return
                   Average is -11%
 Positive long run return: the adjusted
  average return AAR of the first, second and
  third years are positive
 Lower return on longer period: the AAR of
  the first year is better than second year,
  which is better than the third year
 IPO stocks having higher closing price on
  IPO days have lower return: NTD 30 is the

               Pi,t - Pi,0 I i,t  I i,0 
      ARi,t                              100%
               Pi,0             I i,0 
   ARi,t is the adjusted return of stock i after t IPO days;
   Pi,t is the closing price of the stock i after t IPO days;
   Ii,t is the index of the corresponding market segment
    of stock i on nstock i's t IPO day.
      AAR n ,t  ( ARi,t ) / n
                   i 1
   AARn,t is the average adjusted return of stock 1,2,..,n
    after their t IPO days respectively.
    Empirical Result I

   The 1-year, 2-year, and 3-year AARs are positive
   The AAR of 3-year is higher than the first & second year
      Statistic Data I

Days     Mean       Min       Max   Range    Median    STDV Positive Negative

     20 11.76%   -31.31%   156.32% 187.63%   0.93% 0.433332       33      31

    250 33.97%   -87.89%   355.36% 443.25%   1.01%    0.99186     30      34

    500 30.02% -109.19%    293.32% 402.51%   10.84% 1.052265      26      26

    750 59.03%   -12.45%   273.58% 286.02%   33.84%    0.9067     20      21

   The AAR of 1, 2, 3 years are higher than the AAR of the first month
   The standard deviations of 1, 2, 3 years are similar
   # of IPO stocks with positive return is similar to the ones with
    negative returns
    Empirical Result II

   The AAR of IPO stocks with higher closing prices on IPO days is
    lower than AAR of all IPO stocks on most of days in 3-year
   The possibility of IPO stock in Taiwan having positive return
    is about 50%
   The adjusted average return of IPO stocks in Taiwan is
    around 30%, as high as 59% after three years.
   The adjusted average performance of IPO stocks may not
    be lower over time
   The AAR of IPO stocks having closing price over NTD 30 on
    IPO day is lower than the AAR of all IPO stocks most of the
    time in three years

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