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Financial Analytics: Science and Experience
 

The cyclical behavior of the IPO market: History and drivers

Vol. 14, Iss. 2, JUNE 2021

Received: 21 January 2021

Received in revised form: 12 February 2021

Accepted: 3 March 2021

Available online: 28 May 2021

Subject Heading: MONITORING OF ECONOMIC PROCESSES

JEL Classification: D82, E22, G24, G32

Pages: 190–207

https://doi.org/10.24891/fa.14.2.190

Vladimir A. BELYAEV Moscow State Institute of International Relations (University) of the Ministry of Foreign Affairs of the Russian Federation (MGIMO University), Moscow, Russian Federation
v.a.belyaeff@gmail.com

ORCID id: not available

Subject. The article considers the phenomenon of clustering in the initial public offering (IPO) market.
Objectives. The aim is to perform a critical analysis of literature on the IPO market behavior and determine the optimal moment of company's listing on stock exchange.
Methods. The study draws on analytical methods of information gathering and processing, as well as the comparative analysis.
Results. The paper summarizes results of works by researchers on the IPO markets clustering, defines criteria for successful listing on stock exchange, unveils a number of factors affecting the market dynamics. It also determines possible ways and indicators to predict the onset of the "hot" market for initial public offerings.
Conclusions. Macroeconomic factors and investor sentiment explain the clustering of IPO markets. Given that the waves in this market are of short-term nature, the macroeconomic performance is an inaccurate indicator, when predicting the onset of waves of initial public offerings, as opposed to investor sentiment. Indicators, like the reversal of the stock market from recession to growth, positive market dynamics for three months, and a period of low imputed volatility may serve as indicators of the imminent onset of a wave of initial public offerings. A successful IPO of a company operating in a particular industry may lead to an increase in the number of transactions of similar companies from this industry, provided that the stock market continues to show a positive trend during the period, which is necessary to get ready for an IPO.

Keywords: IPO, IPO waves, IPO cycle, Initial Public Offering, clustering

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