Do Investors in the Financial and Technology Sectors React Differently to IPOs Underpricing, as Reflected by Post-Listing Trading Volume and Volatility, While Controlling for Prevailing Interest Rate Conditions?

This research investigates how investor behavior differs between the financial and technology sectors when responding to the underpricing of Initial Public Offerings (IPOs). By analyzing six prominent post-2020 IPOs—three from each sector—the paper examines whether post-listing trading volume and price volatility are systematically influenced by sector-specific factors after controlling for interest rates and other macroeconomic variables. Through a quantitative design using programmatic data extraction, descriptive statistics, and correlation analysis, the study seeks to uncover whether the notion of a “rational, homogeneous investor” holds in practice.

The analysis reveals that investor reactions are not uniform across industries. Financial sector IPOs exhibited higher underpricing—averaging 83.3%—which corresponded with elevated trading activity and volatility, particularly in a climate of rising interest rates. In contrast, technology IPOs displayed more moderate responses, with trading behavior largely shaped by internal sector dynamics and investor familiarity with growth-oriented narratives. These findings challenge the traditional efficient market assumption by highlighting how risk tolerance, sectoral identity, and macroeconomic conditions coalesce to shape post-IPO behavior.

By situating IPO underpricing within a broader behavioral finance framework, the study provides empirical evidence that investor psychology varies with industry context. It contributes to understanding how narrative-driven and risk-based preferences manifest in financial markets—showing that what appears as “irrational exuberance” or conservatism may in fact be contextually rational within different sectoral ecosystems. The paper thus bridges market microstructure with behavioral economics, offering insight into how investors’ sector-specific expectations influence early trading outcomes and volatility in modern capital markets.