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Title:IPO Pricing and the Relative Importance of Investor Sentiment: Evidence from Germany PDF Logo
Authors:Oehler, Andreas
Rummer, Marco
Smith, Peter N.
Issue Date:2004
Series/Report no.:Bank- und Finanzwirtschaftliche Forschung: Diskussionsbeiträge des Lehrstuhls für Betriebswirtschaftslehre, insbesondere Finanzwirtschaft, Universität Bamberg 26
Abstract:The underpricing phenomenon of Initial Public Offerings (IPOs) has been widely studied across different stock markets around the world and has often been explained to be as a result of asymmetrically distributed information and ex-ante uncertainty. However, as Ritter and Welch (2002) argue to the contrary, these theories are unlikely to explain the persistent pattern of high initial returns during the first trading day as well as other features of the returns data. This paper add some further alternative explanations to the traditional theory while focusing on German IPOs during the 1997 to 2001 period and covering a sample of 410 firms. Using time series regressions the cyclical behaviour of the issue activity is examined and we report, using VAR analysis, that lagged underpricing and IPO volume influence the decision to go public. The cross-sectional regression analysis, using both censored and uncensored data, shows that the initial returns are mainly influenced by investor sentiment and demand, and less by ex-ante uncertainty, especially during the dot-com boom.
Subjects:Initial Public Offerings (IPO)
Underpricing
Investor Sentiment
Hot-issue Markets
Ex-ante Uncertainty
JEL:G12
G32
G24
G10
Document Type:Working Paper
Appears in Collections:Diskussionsbeiträge, Lst. f. BWL, insb. Finanzwirtschaft, Universität Bamberg

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