Center of Attention - A Study of Retail Investor Attention and IPO Performance in Sweden
Abstract: We test an attention-induced price-pressure hypothesis on Swedish data by replicating and extending the methodology of Da, Engelberg and Gao (2011). Using a sample of 233 IPOs on Nasdaq Stockholm and First North from 2004 to 2019, we examine the relationship between retail investor attention, proxied by Google search data, and IPO performance. We show that aggregate pre-IPO search activity is a significant predictor of first-day IPO returns, but that it does not explain longer-run price reversals. Contrary to previous literature, we observe that attention-grabbing IPOs outperform also in the long run. When studying the two markets separately, we further find that search data predicts first-day IPO returns on First North, where retail investor attention matters the most, while it has virtually no explanatory power on Nasdaq Stockholm, where retail investors are less important.
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