Price Clustering and Under-Pricing in the IPO Aftermarket

Posted: 27 Apr 2011

See all articles by Owain Ap Gwilym

Owain Ap Gwilym

Bangor Business School

Thanos Verousis

Essex Business School

Date Written: March 3, 2010


This is the first paper to systematically investigate price clustering in new equity assets using a high frequency transactions dataset. We test the hypotheses that past price information and market maker activities are related to price clustering. We report that price clustering in IPOs is substantially greater than the clustering observed for non-IPO assets, which supports the hypothesis that the decision of going public is followed by haziness about the true price. Underpricing is a significant determinant of price clustering for order-book trades, which supports the notion that underpriced IPOs partially reflect price uncertainties. Tick size specifications can be restrictive for individual investors, while giving execution priority to market makers. The characteristics of price clustering for off-book trades differ substantially to price clustering in the order-book.

Suggested Citation

ap Gwilym, Owain and Verousis, Thanos, Price Clustering and Under-Pricing in the IPO Aftermarket (March 3, 2010). International Review of Financial Analysis, Vol. 19, No. 2, pp. 89-97, 2010. Available at SSRN:

Owain Ap Gwilym

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom


Thanos Verousis (Contact Author)

Essex Business School ( email )

United Kingdom

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics