The post-listing performance of new listings: A study on the JSE

Abstract

The authors examine the post-listing performance of new issues on the JSE. On the basis of an empirical study conducted over the 1975-1986 period, evidence is presented indicating that abnormal returns do occur during the post-listing period. The existence of hot and cold issue periods are also found to be evident on the JSE and the performance in the aftermarket is found to differ substantially in these periods. In hot issue periods abnormal returns are found in almost the entire 12-month period subsequent to listing, with excess returns reaching as much as 7% per month during the subsequent year. The results for cold issue periods by contrast reveal abnormal returns only up to the first three months after issue, whereafter substantially negative returns occur in several subsequent months. Significant positive relationships were also evident between the opening premia and some important behavioural characteristics in the aftermarket, namely, abnormal returns one year after issue and volumes traded in the aftermarket.