Clusters of investors around Initial Public Offering

TL;DR

This paper investigates investor clustering patterns around IPOs using network analysis, revealing persistent structures and evidence of institutional herding in the Helsinki Stock Exchange.

Contribution

It applies a statistically validated network method to analyze investor behavior post-IPO, filling a gap in network-based IPO studies.

Findings

Large parts of investor network structures are similar across different securities.

Network structures persist over time for both mature and IPO companies.

Evidence of institutional herding behavior was observed.

Abstract

The complex networks approach has been gaining popularity in analysing investor behaviour and stock markets, but within this approach, initial public offerings (IPO) have barely been explored. We fill this gap in the literature by analysing investor clusters in the first two years after the IPO filing in the Helsinki Stock Exchange by using a statistically validated network method to infer investor links based on the co-occurrences of investors' trade timing for 69 IPO stocks. Our findings show that a rather large part of statistically similar network structures form in different securities and persist in time for mature and IPO companies. We also find evidence of institutional herding.