Ibbotson and Jaffe (1975) discover that the “hot issue” markets are predictable by testing serial correlation of residuals. The first and second month series show the strong serial dependency which means that “hot issue” markets and hot issue
aftermarket can be predicted.
Ibbotson and Jaffe also examine that the high volume of IPO is followed by hot issue market. Therefore, both investors and issuers can forecast the market and