This paper investigates aftermarket volatility and underpricing of the Initial Public Offerings (IPOs) listed on the Toronto Stock Exchange during the period 1990-1999. Our results indicate that aftermarket volatility has increased significantly but the average degree of underpricing has not increased. The decomposition of the aggregate aftermarket volatility in market, industry, and firm-specific components reveals that the increase is mostly attributable to firm-specifc risk. We also find that the volatility of IPOs is smaller than that of comparable (matched) seasoned stocks. Although our results show an overall positive relationship between IPO underpricing and aftermarket volatility, we find that this relationship has become considerably weaker in recent years.

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Journal Canadian Journal of Administrative Sciences
Jog, V, & Wang, L. (Liping). (2002). Aftermarket volatility and underpricing of Canadian initial public offerings. Canadian Journal of Administrative Sciences, 19(3), 231–248.