Long-Term Equity Performance in Poland – Searching for Answers with the Calendar-Time Portfolio Approach

Open access


Research background: The study examines the performance of companies that are going public with equity issuance (IPO) in Poland.

Purpose: Some scholars argue that the buy-and-hold strategy that has been quite widely used suffers from cross correlation and the “bad model” problem. Hence, the calendar-time portfolio approach is used to extend the methodology.

Research Methodology: The empirical procedure is two-step. At the beginning, we calculate an average abnormal return for the portfolio of IPOs firms. The portfolio is rebalanced each month. Next, the risk-adjusted performance is measured by regressing returns on a multifactor time-series regression model. We employ the Fama-French (1993) three-factor model and CAPM for the robustness check.

Results: In a sample of IPOs listed on the Warsaw Stock Exchange, we find negative and highly significant abnormal returns. Alphas are statistically significant in all of the Fama-French regressions and in most of the cases for CAPM.

Novelty: This paper discusses the puzzle of the long-term equity performance of initial public offerings (IPOs) using the calendar-time portfolio approach. Our results point to the economic and statistical significance of long-term IPO underperformance.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Agrawal A. Jaffe J.F. Mandelker G.N. (1992). The post-merger performance of acquiring firms: a re-examination of an anomaly. Journal of Finance47 (4) 1605–1621.

  • Aharony J. Lin C.J. Loeb M.P. (1993). Initial public offerings accounting choices and earnings management. Contemporary Accounting Research10 (1) 61–81.

  • Ariel R.A. (1987). A monthly effect in stock returns. Journal of Financial Economics18 (1) 161–174.

  • Asquith P. (1983). Merger bids uncertainty and stockholder returns. Journal of Financial Economics11 (1–4) 51–83.

  • Aussenegg W. (2000). Privatization Versus Private Sector Initial Public Offerings in Poland. Multinational Finance Journal4 (1–2) 69–99.

  • Banz R.W. (1981). The relationship between return and market value of common stocks. Journal of Financial Economics9 (1) 3–18.

  • Barber B.M. Lyon J.D. (1997). Detecting long-run abnormal stock returns: The empirical power and specification of test statistics. Journal of Financial Economics43 (3) 341–372.

  • Basu S. (1977). Investment performance of common stocks in relation to their price-earnings ratios: A test of the efficient market hypothesis. Journal of Finance32 (3) 663–682.

  • Brav A. (2000). Inference in long-horizon event studies: A Bayesian approach with application to initial public offerings. Journal of Finance55 (5) 1979–2016.

  • Brav A. Geczy C. Gompers P.A. (2000). Is the abnormal return following equity issuances anomalous? Journal of Financial Economics56 (2) 209–249.

  • Brav A. Gompers P.A. (1997). Myth or reality? The long-run underperformance of initial public offerings: Evidence from venture and nonventure capital-backed companies. Journal of Finance52 (5) 1791–1821.

  • Carhart M.M. (1997). On persistence in mutual fund performance. Journal of Finance52 (1) 57–82.

  • Chan P.T. Moshirian F. Ng D. Wu E. (2007). The underperformance of the growth enterprise market in Hong Kong. Research in International Business and Finance21 (3) 428–446.

  • Corhay A. Teo S. Rad A.T. (2002). The long run performance of Malaysian initial public offerings (IPOs): Value and growth effects. Managerial Finance28 (2) 52–65.

  • Czapiewski L. Lizińska J. (2014). Performance of Polish IPO Firms: Size and Profitability Effect. Gospodarka Narodowa1 53–70.

  • Davidson III W.N. Tong S. Worrell D.L. Rowe W. (2006). Ignoring rules of succession: How the board reacts to CEO illness announcements. Journal of Business Strategies23 (2) 93–113.

  • Dichev I.D. Janes T.D. (2003). Lunar cycle effects in stock returns. Journal of Private Equity6 (4) 8–29.

  • Drobetz W. Kammermann M. Wälchli U. (2005). Long-run performance of initial public offerings: The evidence for Switzerland. Schmalenbach Business Review57 (3) 253–275.

  • Durukan M.B. (2002). The relationship between IPO returns and factors influencing IPO performance: Case of Istanbul Stock Exchange. Managerial Finance28 (2) 18–38.

  • Fama E.F. (1998). Market efficiency long-term returns and behavioral finance1. Journal of Financial Economics49 (3) 283–306.

  • Fama E.F. French K.R. (1993). Common Risk Factors in the Returns on Stock and Bonds. Journal of Financial Economics33 (1) 3–56. DOI: 10.1016/0304-405X(93)90023-5.

  • Fama EF. French K.R. (2016). Dissecting anomalies with a five-factor model. Review of Financial Studies29 (1) 69–103.

  • Foster G. Olsen C. Shevlin T. (1984). Earnings releases anomalies and the behavior of security returns. Accounting Review 574–603.

  • French K.R. (1980). Stock returns and the weekend effect. Journal of Financial Economics8 (1) 55–69.

  • Goodman D.A. Peavy J.W. (1986). The low price effect: relationship with other stock market anomalies. Review of Financial Economics22 (1) 18.

  • Hackel K.S. Livnat J. Rai A. (1994). The free cash flow/small-cap anomaly. Financial Analysts Journal50 (5) 33–42.

  • Hirshleifer D. Shumway T. (2003). Good day sunshine: Stock returns and the weather. Journal of Finance58 (3) 1009–1032.

  • Ibbotson R.G. (1975). Price performance of common stock new issues. Journal of Financial Economics2 (3) 235–272.

  • Ikenberry D. Lakonishok J. Vermaelen T. (1995). Market underreaction to open market share repurchases. Journal of Financial Economics39 (2–3) 181–208.

  • Jaffe J.F. (1974). Special information and insider trading. Journal of Business47 (3) 410–428.

  • Jegadeesh N. Titman S. (1993). Returns to buying winners and selling losers: Implications for stock market efficiency. Journal of Finance48 (1) 65–91.

  • Jelic R. Briston R. (2003). Privatisation initial public offerings: The Polish experience. European Financial Management9 (4) 457–484.

  • Jewartowski T. Lizińska J. (2012). Short-and long-term performance of Polish IPOs. Emerging Markets Finance and Trade48 (2) 59–75.

  • Kothari S.P. Warner J.B. (1997). Measuring long-horizon security price performance. Journal of Financial Economics43 (3) 301–339.

  • Lakonishok J. Smidt S. (1988). Are seasonal anomalies real? A ninety-year perspective. Review of Financial Studies1 (4) 403–425.

  • Lizińska J. Czapiewski L. (2016). Is the IPO Anomaly in Poland Only Apparent or Real? In: The Essence and Measurement of Organizational Efficiency (pp. 175–194). Cham: Springer.

  • Loughran T. Ritter J.R. (1995). The new issues puzzle. Journal of Finance50 (1) 23–51.

  • Lyn E.O. Zychowicz E.J. (2003). The performance of new equity offerings in Hungary and Poland. Global Finance Journal14 (2) 181–195.

  • Lyon J.D. Barber B.M. Tsai C.L. (1999). Improved methods for tests of long-run abnormal stock returns. Journal of Finance54 (1) 165–201.

  • Mandelker G. (1974). Risk and return: The case of merging firms. Journal of Financial Economics1 (4) 303–335.

  • Michaely R. Thaler R. H. Womack K. L. (1995). Price reactions to dividend initiations and omissions: Overreaction or drift? Journal of Finance50 (2) 573–608.

  • Mitchell M.L. Stafford E. (2000). Managerial decisions and long-term stock price performance. Journal of Business73 (3) 287–329.

  • Omran M. (2005). Underpricing and long-run performance of share issue privatizations in the Egyptian stock market. Journal of Financial Research28 (2) 215–234.

  • Paudyal K. Saadouni B. Briston R.J. (1998). Privatization of initial public offerings in Malaysia: Initial premium and long-term performance. Pacific-Basin Finance Journal6 (5) 427–451.

  • Ritter J.R. (1991). The long-run performance of initial public offerings. Journal of Finance46 (1) 3–27.

  • Rozeff M.S. Kinney Jr W.R. (1976). Capital market seasonality: The case of stock returns. Journal of Financial Economics3 (4) 379–402.

  • Spiess D.K. Affleck-Graves J. (1999). The long-run performance of stock returns following debt offerings. Journal of Financial Economics54 (1) 45–73.

  • Stehle R. Ehrhardt O. Przyborowsky R. (2000). Long-run stock performance of German initial public offerings and seasoned equity issues. European Financial Management6 (2) 173–196.

  • Stoll H.R. Curley A.J. (1970). Small business and the new issues market for equities. Journal of Financial and Quantitative Analysis5 (3) 309–322.

  • Xia X. Wang Y. (2003). The long-run performance of initial public offerings in China Journal of Emerging Market Finance2 (2) 181–205.

  • Yook K.C. (2010). Long-run stock performance following stock repurchases. Quarterly Review of Economics and Finance50 (3) 323–331.

  • Zhang Y. Risen J.L. Hosey C. (2014). Reversing one’s fortune by pushing away bad luck. Journal of Experimental Psychology: General143 (3) 1171.

Journal information
All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 97 97 16
PDF Downloads 67 67 24