PERFORMANCE OF THE UK INVESTMENT TRUST IPOs

In this study we investigate the performance of investment trust new issues during their first 750 days of trading. Research on the initial performance of new issues has documented that abnormal returns are obtained during the first day of trading. We compare the performance of investment trust new issues with the performance of size and style-based matching investment trusts taking the multinational dimension of these investments into account. We also investigate the performance of investment trust new issues conditional on the intensity of institutional and individual investor share holdings to reflect the impact of information differences on price performance. We also analyse the differences between share prices of investment trust new issues and the prices of the underlying assets. Investment trust discounts increase on average during the study period from-0.08% to 14.66%. The differences between the CAR for investment trust new issues and the corresponding matching funds is statistically significant at the 5% level for Europe, Emerging Markets, UK Capital and Growth investment trust fund styles. The test result of the differences in discounts between size and style-based matching investment trusts and the corresponding investment trust new issues are statistically significant at the1% level for all groups of investment trusts except Japan fund style. For all styles of funds studied matching trusts show higher level of discount than discounts on investment trust new issues.