Focusing on the equal-weighted abnormal returns of the NMGR-VOL portfolios in Panel A, we find that the High-Low NMGR hedge profits are much higher among high-VOL firms than among low-VOL firms.
15) For example, the valueweighted High-Low NMGR spread in three-year abnormal returns increases from 26.
However, the high-NMGR, high-VOL portfolio has only 418 firms, less than one-ninth of the sample IPOs (604), and the number of IPOs in the high NMGR column of portfolios decreases monotonically from low to high VOL.
As noted earlier (Table III), there is a significant positive correlation between NMGR and UWR and size (MV).
In this subsection, we report the calendar-time factor-adjusted performance of high-, medium-, and low-NMGR, UWR, and APA portfolios as well as high minus low NMGR, UWR, and APA hedge portfolios.
Furthermore, the high minus low NMGR hedge portfolio earns a highly significant abnormal return.
In fact, consistent with the portfolio tests in Section III, the abnormal return found for the value-weighted high minus low NMGR hedge portfolio in Panel A is statistically significant, and larger in magnitude than that found for the equal-weighted hedge portfolio.
Furthermore, if investors do not interpret the information content of underwriter reputation and the number of managing underwriters appropriately, then this could explain why NMGR and UWR are positively related to long-run performance (Result 1).