Uncertain demand, heterogeneous expectations, and unintentional IPO underpricing

Financial Review

Volumn 41, Issue 1, 2006, Pages 33-54

  Gouldey, Bruce K ^a  

^a SHENANDOAH UNIVERSITY   (United States)

Author keywords

Book building; Initial public offering; IPO premarket; Underpricing

Indexed keywords

EID: 77953238051     PISSN: 07328516     EISSN: 15406288     Source Type: Journal    
DOI: 10.1111/j.1540-6288.2006.00132.x     Document Type: Article

References (39)

1. Aggarwal, R., 2000. Stabilization activities by underwriters after initial public offerings, Journal of Finance 55, 1075–1103.
2. Aggarwal, R. and P. Rivoli, 1990. Fads in the initial public offering market? Financial Management 19, 45–57.
3. Baron, D., 1982. A model of the demand of investment banking advising and distribution services for new issues, Journal of Finance 37, 955–976.
4. Beatty, R.P. and J.R. Ritter, 1986. Investment banking, reputation, and the underpricing of initial public offerings, Journal of Financial Economics 15, 213–232.
5. Benveniste, L.M., W. Busaba, and W.J. Wilhelm, Jr., 2002. Information externalities and the role of underwriters in primary equity markets, Journal of Financial Intermediation 11, 61–86.
6. Benveniste, L., A. Ljungqvist, W.J. Wilhelm, Jr., and X. Yu, 2003. Evidence of information spillovers in the production of investment banking services, Journal of Finance 58, 577–608.
7. Benveniste, L.M. and P.A. Spindt, 1989. How investment bankers determine the offer price and allocation of new issues, Journal of Financial Economics 24, 343–361.
8. Benveniste, L.M. and W.J. Wilhelm, Jr., 1997. Initial public offerings: Going by the book, Journal of Applied Corporate Finance 10, 98–108.
9. Bhabra, H.S. and R.H. Pettway, 2003. IPO prospectus information and subsequent performance, The Financial Review 38, 369–397.
10. Chen, H.-C. and J.R. Ritter, 2000. The seven percent solution, Journal of Finance 55, 1105–1131.
11. Cliff, M. and D.J. Denis, 2004. Do IPO firms purchase analyst coverage with underpricing? Journal of Finance 59, 2871–2901.
12. Demers, E. and K. Lewellen, 2003. The marketing role of IPOs: Evidence from internet stocks, Journal of Financial Economics 68, 413–437.
13. Diether, K.B., C.J. Malloy, and A. Scherbina, 2002. Differences of opinion and the cross section of stock returns, Journal of Finance 57, 2113–2141.
14. Drake, P.D. and M.R. Vetsuypens, 1993. IPO underpricing and insurance against legal liability, Financial Management 22, 64–73.
15. Ellis, K., R. Michaely, and M. O'Hara, 2000. When the underwriter is the market maker: An examination of trading in the IPO secondary market, Journal of Finance 55, 1039–1074.
16. Feller, W., 1968. An Introduction to Probability Theory and Its Applications, Vol. I, 3rd ed. (John Wiley & Sons, New York, NY).
17. Freund, J.E., 1971. Mathematical Statistics, 2nd ed. (Prentice-Hall, Englewood Cliffs, NJ).
18. Garfinkel, J.A., 1993. IPO underpricing, insider selling and subsequent equity offerings: Is underpricing a signal of quality? Financial Management 22, 74–83.
19. Habib, M.A. and A. Ljungqvist, 2001. Underpricing and entrepreneurial wealth losses in IPOs: Theory and evidence, Review of Financial Studies 14, 433–458.
20. Hanley, K.W., 1993. The underpricing of initial public offerings and the partial adjustment phenomenon, Journal of Financial Economics 34, 231–250.
21. Hebb, G.M., 2002. Conflict of interest in commercial bank equity underwriting, The Financial Review 37, 185–205.
22. Houge, T., T. Loughran, G. Suchanek, and X. Yan, 2001. Divergence of opinion, uncertainty, and the quality of initial public offerings, Financial Management 30, 5–23.
23. Ibbotson, R.G., 1975. Price performance of common stock new issues, Journal of Financial Economics 2, 235–272.
24. Jarrow, R., 1980. Heterogeneous expectations, restrictions on short sales, and equilibrium asset prices, Journal of Finance 35, 1105–1113.
25. Li, M., T.H. McInish, and U. Wongchoti, 2005. Asymmetric information in the IPO aftermarket, The Financial Review 40, 131–153.
26. Loughran, T. and J.R. Ritter, 2004. Why has IPO underpricing changed over time? Financial Management 33, 5–37.
27. Ljungqvist, A. and W.J. Wilhelm, Jr., 2005. Does prospect theory explain IPO market behavior? Journal of Finance 60, 1759–1790.
28. Malkiel, B.G., 2003. A Random Walk Down Wall Street, 8th ed. (W.W. Norton & Co., New York, NY).
29. Miller, E.M., 1977. Risk, uncertainty, and divergence of opinion, Journal of Finance 32, 1151–1168.
30. Reilly, F.K., 1977. New issues revisited, Financial Management 6, 28–42.
31. Ritter, J.R., 1991. The long-run performance of initial public offerings, Journal of Finance 46, 3–27.
32. Ritter, J.R., 1998. Initial public offerings, Contemporary Finance Digest, 5–30.
33. Ritter, J.R. and I. Welch, 2002. A review of IPO activity, pricing and allocations, Journal of Finance 57, 1795–1828.
34. Rock, K., 1986. Why new issues are underpriced, Journal of Financial Economics 15, 187–212.
35. Rydqvist, K., 1997. IPO underpricing as tax efficient compensation, Journal of Banking and Finance 21, 295–313.
36. Schenone, C., 2004. The effect of banking relationships on the firms' IPO underpricing, Journal of Finance 59, 2903–2958.
37. Tinic, S.M., 1988. Anatomy of initial public offerings of common stock, Journal of Finance 43, 789–822.
38. Wagner, H.M., 1969. Principles of Operations Research (Prentice-Hall, Englewood Cliffs, NJ).
39. Welch, I., 1989. Seasoned offerings, imitation costs, and underpricing of initial public offerings, Journal of Finance 44, 421–450.