First-day IPO returns, preference for asymmetry and investor sentiment
Abstract
This paper aimed to investigate the relationship between the preference for asymmetry, investor sentiment and the first-day returns of the Brazilian companies that conducted IPO in the period from 2005 to 2017. The sample included 105 companies, among the 150 who conducted IPO in that range of 13 years. The econometric method used was regression analysis. The main results showed that both the investors' preference for asymmetry as the investor sentiment measured by the index with market variables and by the volume affected positively the IPO first-day returns, so we cannot reject the research hypothesis. The results were not robust to other investor sentiment proxies (Momentum, Consumer Confidence Index and Industry Confidence Index), however, the asymmetry and the sentiment index effects remained evident in all estimates, but when we estimated with companies aged over 11 years at the time of IPO. The theoretical contribution of the research involves, in addition to the discussion on the idiosyncratic asymmetry in the Brazilian market at the time of IPOs, the verification of the age of the company's role to verify the effect of asymmetry and the investor sentiment in the IPO first-day returns. Therefore, we conclude that investor soverreact to optimistic moments (investor sentiment), showing their preference for asymmetry related to first-day IPO returns.
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