21
Prior
research
in
United
States
of
America
has
been
done
by
Ritter
(1991),
it
stated
that
long
run
performance
of
IPO
has
underperformed
relatively
to every
dollar
invested;
investors
received
eighty-three
cents
in
return.
Reilly
(1977)
has
investigated
the
United
States
of
America
IPOs
from
1972
to
1975
with
486 samples,
and over 1 year period, it was underperformed
by 11.60%.
Another supporting evidence that has been done by another researchers in
Turkey,
it
shows
that
there
are
underperformances
in
the
long
run.
IPOs
were
significantly
underperforming
the
Istanbul
Stock Exchange
Index 100
(Erdogan,
2010).
In
Spanish
Capital
Market,
some
evidence
showed
that
there
are negative long run returns (Otero & Mendez, 2005).
2.1.5 Factors Incorporated
in IPOs Market Performance
Investors might
be
interested in
different area;
one
might
be
interested in
a
long-term
investment,
while
the
other
might
be
interested
in
a short-term
investment.
When
IPO shares are underpriced,
during
the initial
market-trading
day,
the
closing
price
might
increase
by
a significant
amount.
For
short-term
investors,
this
will
results
in
a
higher
initial
return.
The
fact
that
underpricing
occurs
which
will
results
in
low
or
high
initial
returns,
there
are
some
factors
that are incorporated
in this after market performance.
Three
distinct
factors
that
affect
the
aftermarket
performance
are,
information
asymmetry,
signaling
theory
and
overreaction.
Based
on Rock’s
(1986)
arguments,
information
symmetry
occurs
when
a group
of
investor
has
more
information
than
the
other.
The
informed
investor
will
be
able
to
pick
out
the
good
shares
and
left
the
bad
shares
to
the
uninformed
investors.
Beatty
and
Ritter (1986) has extended Rock’s (1986) model on the uncertainty
of the value
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