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Leoni, Dr Patrick (2007) A market microstructure explanation of IPOs underpricing. UNSPECIFIED. (Unpublished)
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Abstract
In a typical IPO game with first-price auctions, we argue that risk-averse investors always underbid in equilibrium because of sucbjective interpreetations of the firm' communications about its actual value and resulting risk aversion about the likelihood of facing investors with higher valuations. We show that the noisier the investors' inferences of the firm' value(in the sense of first-order stochastic dominance) the higher the underbidding level. Our finding is independent of winner's curse effects and possible irrational, and allows for a testable theory.
| Item Type: | Other |
|---|---|
| Keywords: | IPO underpricing; first-price auction,; risk aversion; firm' communication |
| Academic Unit: | Faculty of Social Sciences > Economics, Finance and Accounting |
| Item ID: | 645 |
| Depositing User: | Ms Sandra Doherty |
| Date Deposited: | 09 Aug 2007 |
| Refereed: | No |
| Related URLs: | |
| URI: | https://mural.maynoothuniversity.ie/id/eprint/645 |
| Use Licence: | This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here |
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