Long-Run IPO Investments, Is it Risky?

Abstract

Most investors suggest that the stock investment in the short-run will run a lower risk than in the long run. This point of view is not necessarily true. The uncertainty/volatility of economic circumtances will decrease probability of risk. The longer the period of investment is the lower probability the uncertainty of economic circumtances-run. This research purpose is to provide information about the pattern of risk and return of IPO securities which invested in three year period. Researcher suggest that the IPO securities in the long-run will result lower risk and return. By looking into the stocks performance of the IPO securities. This research adopt BHAR model to represent the holding period return, CAPM to predict the yields in risky assets and Fama-French Three Factor model to measure the systematic risk which cannot be prove by CAPM model. The population is BEI listed companies. The sample of the research is the companies which carried out IPO from 2008-2010 and the companies restate from BEI listed companies with closest market capitalization. Data processing using IBM SPSS 20.0 for Windows. The empirical results shows that market risk premium, firm size and book-to-market value significantly impact to higher volatility of IPO stocks return within three year period after the first offerings.