Price Discovery in Initial Public Offerings and the Role of the Lead Underwriter

Journal of Finance, December 2000

30 Pages Posted: 10 Oct 2010 Last revised: 24 Feb 2012

See all articles by Reena Aggarwal

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business ; European Corporate Governance Institute (ECGI)

Patrick Conroy

affiliation not provided to SSRN

Date Written: 1999

Abstract

We examine the price discovery process of initial public offerings (IPOs) using a unique dataset. The first quote entered by the lead underwriter in the five-minute preopening window explains a large proportion of initial returns even for hot IPOs. Significant learning and price discovery continues to take place during these five minutes with hundreds of quotes being entered. The lead underwriter observes the quoting behavior of other market makers, particularly the wholesalers, and accordingly revises his own quotes. There is a strong positive relationship between initial returns and the time of day when trading starts in an IPO.

Suggested Citation

Aggarwal, Reena and Conroy, Patrick, Price Discovery in Initial Public Offerings and the Role of the Lead Underwriter (1999). Journal of Finance, December 2000, Available at SSRN: https://ssrn.com/abstract=1689712 or http://dx.doi.org/10.2139/ssrn.1689712

Reena Aggarwal (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3784 (Phone)
202-687-0798 (Fax)

HOME PAGE: http://https://gufaculty360.georgetown.edu/s/contact/00336000014RhE9AAK/reena-aggarwal

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Patrick Conroy

affiliation not provided to SSRN ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
110
Abstract Views
1,064
rank
293,020
PlumX Metrics