3 The effect of IPO characteristics on
long-run performance of Taiwan’s
IPOs: evidence from efficiently
learning markets
Anlin Chen, Sue L. Chiou, and Chinshun Wu
Abstract
Two market efficiency hypotheses are employed in this study to investigate the long-run
performance puzzle of initial public offerings (IPOs) in Taiwan: the efficient markets
hypothesis (EMH) and the hypothesis of an efficiently learning market (ELM). We sim-
ulate the latent true prices behind the price limits and measure the IPO expected returns
using a Fama–French three-factor model under ELM. Our results show that IPO
investors in Taiwan learn rationally from market information and that the IPO long-run
performance puzzle is dissipated under an efficiently learning market. Furthermore, ...