Benjamin Felix

into new issues in the sample than into established firms of the same size.

Pretty crazy.

And hope that they're right.

Yeah, I guess that's true.

That is a good point.

That's data ending in the 90s.

And there's a more recent 2019 study from Dimensional Fund Advisors where they looked at the first year secondary market performance of more than 6,000 IPOs from 1991 to 2018.

So that actually does pick up right where Jay Ritter's sample ends.

And they find that a portfolio of IPOs generally underperform the market and the small cap index by about 2% per year.

The main exception is the 1992 to 2000 period when the IPO portfolio outperformed the small cap index by about 1.1% annually.

And that was mainly due to IPOs consisting of small tech companies that their prices took off during the dot-com boom.

But we all know what happened after that.

So it looks good for a bit, but not so good afterwards.

If you sold in 2000, we did great.

Correct.

Exactly.

If you timed the bubble perfectly.

This dimensional study finds that the poor returns are largely explained by the factors in the FOMA and French five-factor asset pricing model.

The IPO portfolio behaves like a portfolio of small growth, low profitability, high investment stocks.

also known as junk in AQR's language or small crap growth, as I've heard it called by some people.