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

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.