The medium-term after market in high-tech IPO's: patterns and implications

A number of theoretical models. loosely characterized under the rubric of behavioral finance,suggest that price convergence to value is far from instantaneous and possibly involvesinterplay between noise and informed traders. These models are motivated by documentedanomalous patterns in equity markets and assume some form of psychological bias that affectsinvestor behavior. With the benefit of hindsight it seems clear that the technology sector wentthrough a bubble-like pattern in the late 1990s and that investor biases (if indeed they exist andcan be inferred I may have been even more pronounced. Accordingly. our study focuses, on themedium-term aftermarket in high-tech US IPOs during this period. Using both ordered logicregression and split-population hazard modeling approaches, we document momentum andreversal patterns that are consistent with the predictions of some behavioral finance models.Our findings indicate that momentum variables are important while fundamental variableshave at best weak explanatory power.