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The "Hot Issue" Market of 1980

Jay R. Ritter
The Journal of Business
Vol. 57, No. 2 (Apr., 1984), pp. 215-240
Stable URL: http://www.jstor.org/stable/2352736
Page Count: 26
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The "Hot Issue" Market of 1980
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Abstract

This paper analyzes the "hot issue" market of 1980, the 15-month period starting in January 1980 and extending through March 1981 during which the average initial return on unseasoned new issues of common stock was 48.4%. (This is not an annualized return.) This average initial return compares with an average of 16.3% during the "cold issue" market comprising the rest of the 1977-82 period. An equilibrium explanation for this difference in average initial returns is investigated but is found to be insufficient. Instead, this hot issue market is found to be associated almost exclusively with natural resource issues. For firms in other industries, a hot issue market is barely perceptible.

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