Are Real Estate IPOs a Different Species? Evidence from Hong Kong IPOs

Abstract

It is well documented that in the United States, real estate investment trust (REIT) initial public offerings (IPOs) have an abnormally low initial-day return when compared to that of industrial firm IPOs. Researchers suspect that the abnormal return pattern of REIT IPOs is caused by their unique real estate holdings. Examination of 399 IPOs issued in Hong Kong during the 1986-1997 period reveals strong evidence that suggests that underlying real estate holdings cannot be the sole reason for the observed low initial-day return of REIT IPOs. This investigation indicates that there is a need to re-think the current explanations for the abnormal performance of REIT IPOs.