Initial Public Offerings

Underpricing of initial public offerings in experimental asset markets

“…In contrast to other empirical studies we measure both underpricing relative to the market in absence of an IPO and expected excess returns relative to fundamental asset value. Our design eliminates most, if not all, of the commonly specified reasons for underpricing (Ritter and Welch 2002;Ritter 2003;Ljungqvist 2007: Derrien 2010. Despite our controlled, transparent and symmetric laboratory conditions, we observe underpricing in each IPO session and each repetition.…”

“…Recent reviews have summarized the explanations of the financial economics literature on the IPO underpricing phenomenon (Ritter and Welch 2002;Ritter 2003;Ljungqvist 2007;Derrien 2010). Most explanations emphasize different types of institutional imperfections relating to asymmetric information, most importantly Footnote 3 (continued) tributing to the literature on bubbles in the Smith design, furthermore we investigate whether mispricing over the life-time of the asset is different when subjects are endowed with shares, i.e., when they receive them as a gift, rather than when they purchase their shares in the IPO.…”

Factors Influencing IPO Decisions. Do Corporate Managers Use Market and Corporate Timing? A Survey

“…The clustering of IPOs has been relatively well -documented in capital markets worldwide. Starting with Ibbotson and Jaffe [1975], a number of studies have demonstrated that IPOs tend to cluster in both time and sectors [Ritter, 1984;Ibbotson, Sindelar, Ritter, 1988, 1994Derrien, 2010]. A rational explanation to this phenomenon is that IPO clustering is due to the clustering of real investment opportunities, which prompt companies to seek capital with a view to using these opportunities in similar periods of time.…”

Behavioral Finance and Capital Markets

“…Starting with Ibbotson and Jaffe (1975), a number of studies have demonstrated that IPOs tend to cluster both in time and in sectors (Ritter, 1984;Ibbotson et al, 1988Ibbotson et al, , 1994Derrien, 2010).…”

“…Managers anchor to historical levels of stock prices and are more likely to issue new equity if they consider it temporarily overvalued compared to the reference level. This may explain clustering patters in IPO activities that tend to coincide with a good situation on the market or in the industry (Ritter, 1984;Ritter, 1988, 1994;Derrien, 2010). point at reference dependence combined with mental accounting to explain the well-documented IPO underpricing.…”