TY - JOUR T1 - The Role of Investor Sentiment in the<br/>IPO Aftermarket JF - The Journal of Investing SP - 99 LP - 110 DO - 10.3905/joi.2012.21.4.099 VL - 21 IS - 4 AU - Sanjiv Jaggia AU - Satish Thosar Y1 - 2012/11/30 UR - https://pm-research.com/content/21/4/99.abstract N2 - This article uses two price signals on the cusp of an IPO, price revision (change from pre-offer to offer price) and initial return (change from offer to market open price), as proxies of investor sentiment, which appears to have potent and lingering effects over a six-month aftermarket window. For instance, firms that rank high on our investor optimism scale exhibit considerable initial price momentum and sharp reversals. The article shows that a mechanical trading strategy designed to exploit aftermarket patterns generates economically significant risk-adjusted returns compared to a buy-andhold benchmark. Robustness checks indicate that it is important to implement the strategy as early as possible and the key driver is the serial dependence in aftermarket returns.TOPICS: Portfolio construction, equity portfolio management, passive strategies ER -