Abstract

http://ssrn.com/abstract=900988
 
 

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Is IPO Underperformance a Peso Problem?


Andrew Ang


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Li Gu


Columbia University

Yael V. Hochberg


National Bureau of Economic Research (NBER); Rice University - Jesse H. Jones Graduate School of Business

May 2006

NBER Working Paper No. w12203

Abstract:     
Recent studies suggest that the underperformance of IPOs in the post-1970 sample may be a small sample effect or %u201CPeso%u201D problem. That is, IPO underperformance may result from observing too few star performers ex-post than were expected ex-ante. We develop a model of IPO performance that captures this intuition by allowing returns to be drawn from mixtures of outstanding, benchmark, or poor performing states. We estimate the model under the null of no ex-ante average IPO underperformance and construct small sample distributions of various statistics measuring IPO relative performance. We find that small sample biases are extremely unlikely to account for the magnitude of the post-1970 IPO underperformance observed in data.

Number of Pages in PDF File: 49

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Date posted: May 25, 2006  

Suggested Citation

Ang, Andrew and Gu, Li and Hochberg, Yael V., Is IPO Underperformance a Peso Problem? (May 2006). NBER Working Paper No. w12203. Available at SSRN: http://ssrn.com/abstract=900988

Contact Information

Andrew Ang (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Li Gu
Columbia University ( email )
3022 Broadway
New York, NY 10027
United States
Yael V. Hochberg
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Rice University - Jesse H. Jones Graduate School of Business ( email )
6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States
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