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Biases in the IPO Pricing Process

Michelle Lowry

Drexel University

G. William Schwert

University of Rochester - Simon School; National Bureau of Economic Research (NBER)

February 2001

Simon School of Business Working Paper No. FR 01-02

By investigating the entire IPO pricing process, beginning when the offering is filed, the paper contributes to the existing literature along four dimensions. First, price updates during the registration period are predictable based on firm and offer-specific characteristics known at the time the offer is filed. Second, price updates reflect market movements prior to the initial filing date as well as during the registration period. Third, positive and negative information learned during the registration period affect the offer price asymmetrically. Finally, public and private information learned during the registration period have different effects on the offer price. While a number of the biases that we uncover are consistent with one or more theories regarding IPOs, many remain a puzzle.

Number of Pages in PDF File: 40

Keywords: IPO, Underpricing, Private Information, Learning

JEL Classification: G32, G24, G14

working papers series

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Date posted: February 22, 2001  

Suggested Citation

Lowry, Michelle and Schwert, G. William, Biases in the IPO Pricing Process (February 2001). Simon School of Business Working Paper No. FR 01-02. Available at SSRN: http://ssrn.com/abstract=260278 or http://dx.doi.org/10.2139/ssrn.260278

Contact Information

Michelle B. Lowry
Drexel University ( email )
Philadelphia, PA 19104
United States
215-895-6070 (Phone)
G. William Schwert (Contact Author)
University of Rochester - Simon School ( email )
Carol Simon Hall 3-110L
Rochester, NY 14627
United States
585-275-2470 (Phone)
585-461-5475 (Fax)
HOME PAGE: http://schwert.ssb.rochester.edu
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  20
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