Do IPO index portfolios improve the investment opportunities for mean-variance investors?

We set out in this study to examine whether investors can improve their investment opportunity sets through the addition of an IPO index portfolio into various sets of benchmark portfolios. Using the IPOX indices from the years 1980-2006, we find that adding an IPO index portfolio does lead to a statistically significant enlargement of the investment opportunity set for investors. Our empirical findings are robust, demonstrating that there is scope for the further development of financial products relating to IPO stocks, since investors can gain diversification benefits through investing in such IPO-related products.