Abstract
We examine the performance of initial public offerings (IPO) using a stochastic dominance approach that captures investors’ preferences for higher moments of the returns distribution. Using a comprehensive sample of 6,671 IPOs in the U.S. from 1980 to 2012, we find no evidence that IPOs underperform size and book-to-market matched portfolios. We find that the market portfolios do not second-order stochastic dominate IPOs with VC-backing, backed by high reputation VCs, low debt IPOs, or those backed by growth capital. We also examine the IPO performance in booms vs. recessions as well as in times of low vs. high sentiment. Overall, our results shed additional light on investor preferences in IPO returns, extend the role that capital backing plays in IPO performance, and highlight the importance of considering higher order moments in performance evaluation.
JEL Codes
C19, G10, G24, G32
Keywords
Initial Public Offerings, Long-Run Performance, Stochastic Dominance
Recommended Citation
Mihov, Vassil T. and Ren, Jue
(2025)
"IPO Performance and Stochastic Dominance,"
The Journal of Entrepreneurial Finance:
Vol. 27:
Iss.
1, pp. 80-110.
DOI: https://doi.org/10.57229/2373-1761.1524
Available at:
https://digitalcommons.pepperdine.edu/jef/vol27/iss1/4
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial 4.0 License
