Initial Public Offerings in “Hot” and “Cold” Markets - A Study of the Swedish IPO market

Abstract: This thesis aims to test if the IPO market differs in hot and cold market conditions in terms of industry clustering, firm characteristics, and long-run performance. The study is conducted on the Swedish IPO market ranging from 1992 to 2020 and 2017 in analyzing the long-run performance. The study compares different variables across the period depending on the market condition. The long-run performance is measured by taking the risk-adjusted returns over three years. The results from the study support that there are differences in some of the firm characteristics in different market conditions and a slight difference in industry clustering. Hot market firms tend to have a higher percentage of institutional owners and overallotment by underwriters. One of the industries that are analyzed differs in long-run performance. However, the study rejects any difference in risk-adjusted long-run performance depending on the market conditions. Regressing firm characteristics and market conditions on returns performance we find no significant difference between conditions or effects of firm characteristics.