The Demand for Stocks: An Analysis of IPO Auctions

Abstract

We analyze a unique data set that includes the full demand schedules of 27 Israeli IPOs that were conducted as non-discriminatory (uniform price) auctions. To the best of our knowledge, this is the first time the whole demand schedule for any asset is described. The demand schedules are relatively flat around the auction clearing price: The average elasticity is 37. The elasticity is low when the return distribution contains a large unique component. We also find a significant average abnormal return of 4.5% on the first trading day and a positive correlation between the abnormal return and the elasticity of demand.