Retail Investor Attention and IPO Valuation
Forthcoming in European Financial Management
46 Pages Posted: 5 Jul 2016 Last revised: 10 Nov 2016
Date Written: November 7, 2016
Given restrictions placed on communication with prospective investors, retail investor attention can help firms/underwriters with the task of initially valuing an IPO. Using Google search volume to proxy for retail investor attention, we find that the presence of and an increase in retail attention following initial filing but prior to initial pricing are positively related to initial valuations. Our results are robust to alternative matching methods to identify our matched sample of non-IPO firms and to including several controls for institutional demand. We conclude that retail investor attention plays a critical role in the early stages of IPO valuation.
Keywords: initial public offering; equity valuation; retail investor; investor attention
JEL Classification: G30, G32
Suggested Citation: Suggested Citation