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

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: 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