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Biases in the IPO Pricing Process

40 Pages Posted: 22 Feb 2001  

Michelle Lowry

Drexel University

G. William Schwert

University of Rochester - Simon Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2001

Abstract

By investigating the entire IPO pricing process, beginning when the offering is filed, the paper contributes to the existing literature along four dimensions. First, price updates during the registration period are predictable based on firm and offer-specific characteristics known at the time the offer is filed. Second, price updates reflect market movements prior to the initial filing date as well as during the registration period. Third, positive and negative information learned during the registration period affect the offer price asymmetrically. Finally, public and private information learned during the registration period have different effects on the offer price. While a number of the biases that we uncover are consistent with one or more theories regarding IPOs, many remain a puzzle.

Keywords: IPO, Underpricing, Private Information, Learning

JEL Classification: G32, G24, G14

Suggested Citation

Lowry, Michelle and Schwert, G. William, Biases in the IPO Pricing Process (February 2001). Simon School of Business Working Paper No. FR 01-02. Available at SSRN: https://ssrn.com/abstract=260278 or http://dx.doi.org/10.2139/ssrn.260278

Michelle B. Lowry

Drexel University ( email )

Philadelphia, PA 19104
United States
215-895-6070 (Phone)

G. William Schwert (Contact Author)

University of Rochester - Simon Business School ( email )

Carol Simon Hall 3-110L
Rochester, NY 14627
United States
585-275-2470 (Phone)
585-461-5475 (Fax)

HOME PAGE: http://schwert.ssb.rochester.edu

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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