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A Review of IPO Activity, Pricing and Allocations

Jay R. Ritter
University of Florida - Department of Finance, Insurance and Real Estate

Ivo Welch
Brown University - Department of Economics; National Bureau of Economic Research (NBER)

February 2002

Yale ICF Working Paper No. 02-01

Abstract:
We review the theory and evidence on IPO activity: why firms go public, why they reward first-day investors with considerable underpricing, and how IPOs perform in the long run. Our perspective on the literature is three-fold: First, we believe that many IPO phenomena are not stationary. Second, we believe research into share allocation issues is the most promising area of research in IPOs at the moment. Third, we argue that asymmetric information is not the primary driver of many IPO phenomena. Instead, we believe future progress in the literature will come from non-rational and agency conflict explanations. We describe some promising such alternatives.

Keywords: IPOs

JEL Classifications: G24

Working Paper Series

Date posted: January 09, 2002 ; Last revised: April 10, 2002

Suggested Citation

Welch, Ivo and Ritter, Jay R., A Review of IPO Activity, Pricing and Allocations (February 2002). Yale ICF Working Paper No. 02-01. Available at SSRN: http://ssrn.com/abstract=296393 or doi:10.2139/ssrn.296393

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Contact Information

Ivo Welch (Contact Author) Brown University - Department of Economics ( email ) 64 Waterman Street Providence, RI 02912 United States
National Bureau of Economic Research (NBER) 1050 Massachusetts Avenue Cambridge, MA 02138 United States
Jay R. Ritter University of Florida - Department of Finance, Insurance and Real Estate ( email ) P.O. Box 117168 Gainesville, FL 32611 United States (352) 846-2837 (Phone) (352) 392-0301 (Fax) HOME PAGE: http://bear.cba.ufl.edu/ritter