The Variability of IPO Initial Returns in Turkey

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Acikgoz S., Gokkaya V.

EGE ACADEMIC REVIEW, vol.17, no.1, pp.33-57, 2017 (Peer-Reviewed Journal) identifier

  • Publication Type: Article / Article
  • Volume: 17 Issue: 1
  • Publication Date: 2017
  • Doi Number: 10.21121/eab.2017123467
  • Journal Indexes: Emerging Sources Citation Index, TR DİZİN (ULAKBİM)
  • Page Numbers: pp.33-57


The variability or volatility of initial returns to initial public offerings (IPO) is higher for firms that are more difficult to value because of higher information asymmetry. Therefore, firms that are difficult to value are usually underpriced if the IPO initial return value is used as a proxy. In this paper, we investigate whether or not there is a relationship between initial returns to the IPOs and their volatilities within the Turkish IPO market. Initial returns are calculated based on the first day and first month of IPO. Analyzing the data from the first month of going public for 173 Turkish IPOs during the period 1998-2013, we found a strong, positive relationship between them showing underpricing in the Turkish IPO market. Our analysis further indicates that this relationship is determined by factors such as (a) the ratio of the amount of money in insider shares to the total amount (b) the ratio of total number foreign investors to total number of investors and (c) the underwriter reputation.