Economic Policy Uncertainty and Fluctuations in Monthly IPO Volume: Evidence from the US

Article Information
Journal: Business and Economics Research Journal
Title of Article: Economic Policy Uncertainty and Fluctuations in Monthly IPO Volume: Evidence from the US
Author(s): Şenay Açıkgöz, Cem Onur Karatas
Volume: 15
Number: 4
Year: 2024
Page: 331-354
ISSN: 2619-9491
DOI Number: 10.20409/berj.2024.448
Abstract
This research examines the dynamic relationship between economic policy uncertainty (EPU) and initial public offering (IPO) volume in the United States from 1990 to 2020. Employing time-series econometric methods, we find that EPU has a significant negative effect on IPO activities. According to impulse responses, the number of IPOs significantly reacts to the innovations on EPU within the next 1 to 4 months and approaches the new equilibrium in 6 to 8 months. However, EPU does not contribute to forecast error variance decompositions of the number of IPOs. Our empirical results also show that the number of IPOs switches between low-mean/high-variance and high-mean/low-variance regimes. The results have some useful implications for timing IPOs in terms of economic policy uncertainty.

Keywords: Economic Policy Uncertainty, IPOs, VAR, Impulse-responses, Regime Change

JEL Classification: C22, C32, G10, G38

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