Events and Price Adjustment Accuracy: Evidence from Post-IPO Market

45 Pages Posted: 16 Jun 2008 Last revised: 4 Aug 2009

See all articles by Pat Akey

Pat Akey

University of Toronto - Rotman School of Management

Art Durnev

University of Iowa - Henry B. Tippie College of Business

Alexander Molchanov

Massey University

Date Written: August 4, 2009

Abstract

We use the post-IPO market to examine this accuracy of price adjustment to new information. The unique setting of immediate aftermarket allows us to assess subject after the trading has just begun and investors possess little information about stock return properties. They are, therefore, likely to misinterpret firm-specific information in the immediate aftermarket. As time since the IPO elapses, investors accumulate more information, and price reaction to new events becomes more accurate. We show that the accuracy of price adjustment increases by 14% in the first year of trading for all events, and by as much as 26% for public events. We conclude that the incorporation of new information into stock prices becomes more accurate as stocks season.

Keywords: Events, IPO, After-market, Efficiency

JEL Classification: G14

Suggested Citation

Akey, Pat and Durnev, Artyom and Molchanov, Alexander, Events and Price Adjustment Accuracy: Evidence from Post-IPO Market (August 4, 2009). Available at SSRN: https://ssrn.com/abstract=1145849 or http://dx.doi.org/10.2139/ssrn.1145849

Pat Akey

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Artyom Durnev (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
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(514) 398-5394 (Phone)
(514) 398-3876 (Fax)

HOME PAGE: http://www.artdurnev.com

Alexander Molchanov

Massey University ( email )

Auckland
New Zealand

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