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

Summary/Abstract: 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 rom 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.

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