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Forecasting aggregate stock returns using the number of initial public offerings as a predictor

By Gueorgui I. Kolev

Abstract

Large number of Initial Public Offerings (IPOs) reliably predicts subsequent low equally weighted aggregate stock returns and the return differential between small and big firms, both in-sample and out-of-sample. The forecasting patterns are consistent with a behavioral story featuring investor sentiment and limits to arbitrage.Initial Public Offerings

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