25 years of Dutch IPOs: An examination of frequently cited IPO anomalies within main sectors and during hot- and cold-issue periods

This study examines the existence of the initial underpricing and the long-term underperformance anomalies in the Dutch IPO market between 1977 and 2001. We found an average initial underpricing level of 17.6%, measured relative to a sector-specific benchmark. The median initial return was 5.0%, while there were negative initial returns in only 17% of the IPOs. During their first 3 years of listing, IPOs on average underperformed their benchmark by a cumulative 10.0%, but this result is statistically insignificant. The period 1997-beginning of 2000 was a true hot-issue period for growth stocks: their level of initial underpricing was 35.8%, compared to 9.2% during cold-issue periods. These growth IPOs also significantly underperformed their benchmark by 38.4% after 3 years.