The underperformance of the growth enterprise market in Hong Kong

Elsevier Inc
Publication Type:
Journal Article
Research in International Business and Finance, 2007, 21 (3), pp. 428 - 446
Issue Date:
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This paper examines the stock return performance of the IPO stocks which are listed on the Growth Enterprise Market (GEM) in Hong Kong. By using several benchmarks, over 3 years, this paper finds that the results produced are sensitive to the benchmark employed. The two factors causing the underperformance of GEM stocks are the `technology boom and `IPO effects. This suggests that appropriate benchmarks are very important for assessing the performance of newly issued stocks. The results of the cross-sectional analyses suggest that the Hong Kong GEM is a unique market. Since at least 70 percent of the IPO stocks listed on theGEMare technology stocks, the `technology factor outweighs the various hypotheses advocated by previous researchers to explain the poor performance of newly listed stocks.
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