Initial Public Offering First-Day Returns: An Information Arrival Perspective

Abstract:     
This paper examines the intra-day returns to initial public offerings on the first day of trade from an information arrival perspective. We examine underpricing as reflected in the first and subsequent trades on the first day of listing. We find that underpricing is primarily reflected in the first trade. On average, prices tend to decline in the subsequent fifteen minutes with minimal returns after the first fifteen minutes of trade. Despite the majority of information apparently being reflected in the first trade the use of first-day returns is essentially equivalent to the use of first-trade returns when examining the cross-sectional variation in underpricing.

Keywords: Information, Underpricing, Intra-day, Initial Day

Working Paper Series