Research-Thesis: From underpricing to long-term performance: evidence of IPO underprincing in Nasdaq nordic markets.

Abstract

This thesis examines IPO underpricing and long-run stock performance in the Nordic markets, focusing on firms listed on Nasdaq Helsinki and Nasdaq Stockholm between 2010 and 2020. The study investigates whether the degree of first-day underpricing predicts abnormal stock returns over one-, three-, and five-year holding periods. Using a sample of 71 IPOs, the analysis first confirms the presence of systematic underpricing, with an average first-day return of 10.4 percent. Long-run performance is measured using buy-and-hold abnormal returns relative to market benchmarks. Contrary to much of the existing IPO literature, the sample shows positive average abnormal returns over the one- and three-year horizons, while the five-year results are highly skewed and not statistically robust. The findings suggest that the relationship between IPO underpricing and long-run performance is less consistent in Nordic markets than commonly documented in US-focused research. At the same time, the results highlight the sensitivity of long-run IPO performance to methodology, benchmark choice, and the influence of extreme observations.