Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/32236
Authors: 
Burhop, Carsten
Year of Publication: 
2008
Series/Report no.: 
Preprints of the Max Planck Institute for Research on Collective Goods 2008,46
Abstract: 
In this article, we evaluate underpricing of initial public offerings (IPOs) at the Berlin Stock Exchange between 1870 and 1896. In contrast to modern data, first day returns were extraordinary low and averaged less than five percent, even during the speculative period of the early 1870s. Moreover, standard underpricing theories based on asymmetric information, signalling mechanisms, or litigation risk cannot explain underpricing. In contrast to modern markets, the past market return had a negative influence on initial returns. Finally, we show that cash-flow relevant information contained in the corporate charter were readily factored in the first market price. Thus, the historical capital market differed from today's market, but seems to have been efficient.
Subjects: 
Initial public offerings
Financial history
Germany pre-1913
JEL: 
N23
N43
G18
Document Type: 
Working Paper

Files in This Item:
File
Size
810.85 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.