Allocations, adverse selection, and cascades in IPOs: evidence from the Tel Aviv Stock Exchange

• 成果类型: Article
• 署名作者: Amihud, Y; Hauser, S; Kirsh, A
• 署名单位: New York University; Tel Aviv University; Ben-Gurion University of the Negev
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(02)00251-9
• 发表日期: 2003
• 页码: 137-158
• 关键词: IPO; Underpricing; uninformed subscribers; proration

摘要

We examine theories of IPO underpricing using unique data from Israel where the allocation to subscribers is by equal proration. This enables us to simulate the return earned by uninformed investors. Consistent with Rock's (1986) theory of adverse selection, allocations were negatively related to underpricing. But uninformed investors earned a negative allocalion-weighted initial return, although the average initial return was 12%. They could break even, however, by using publicly available information. The data also supports Welch's (1992) theory of information cascades: demand is either extremely high or there is undersubscription, with very few cases in between. (C) 2002 Published by Elsevier Science B.V.