Su Han Chan, George W. Gau, Ko Wang, Stock Market Reaction to Capital Investment Decisions: Evidence from Business Relocations, The Journal of Financial and Quantitative Analysis, Vol. 30, No. 1 (Mar., 1995), pp. 81-100

In contrast with numerous studies that find significant underpricing for initial public offerings of industrial firms, we document a statistically significant average return of −2.82% on the first trading day for a sample of 87 initial public offerings of real estate investment trusts during the 1971–1988 period. Our overpricing result is invariant to offer price, issue size, distribution method, offer period, and underwriter reputation. Newly issued REITs, on average, substantially underperform a matching sample of seasoned REITs during the first 190 trading days. Interestingly, buyers of overpriced REITs are predominantly individual or non-13(f) institutional investors.