Context‐specific experience and institutional investors’ performance

We examine how context-specific experience is correlated with the performance of institutional investors. Specifically, we explore how previous initial public offering (IPO) trading experience affects foreign institutional investors’ selection, bidding, and the profitability of their future IPO inve...

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Bibliographic Details
Published inJournal of banking & finance Vol. 149; p. 106786
Main Authors Neupane, Suman, Thapa, Chandra, Vithanage, Kulunu
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.04.2023
Subjects
Experience
Foreign institutional investors
IPOs
Learning
Learning
Experience
G11
Foreign institutional investors
IPOs
G23
J24
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Summary:We examine how context-specific experience is correlated with the performance of institutional investors. Specifically, we explore how previous initial public offering (IPO) trading experience affects foreign institutional investors’ selection, bidding, and the profitability of their future IPO investments. We find that investors who participate more frequently (i.e., those with more context-specific experience) exhibit different behaviors from those who participate less frequently. After controlling for investor fixed effects and time-varying heterogeneity, we find that only high-frequency investors improve their profitability over time by appropriately varying their subscriptions across IPOs. The effect of context-specific experience also appears to dominate other forms of general investment experience.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2023.106786