Australian IPO pricing in the short and long run

We analyse both initial underpricing and post-listing returns for Australian IPOs. Our results are consistent with the view that unique institutional characteristics may have overwhelmed previous Australian tests of equilibrium models of IPO underpricing. The results also show that Australian IPOs significantly underperform market movements in the three-year period subsequent to listing. Further investigation of these anomalous post-listing returns lead us to reject various 'speculative bubble' explanations. Rather, the evidence suggests a curvilinear relationship between initial and subsequent returns, although the economic significance of the relationship is low.