The Short-Run Price Performance of Investment Trust Ipos on the UK Main Market

32 Pages Posted: 22 Aug 2001

See all articles by Ram Mudambi

Ram Mudambi

Temple University - Department of Strategic Management

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance

Multiple version iconThere are 2 versions of this paper

Date Written: June 2001

Abstract

The short run underpricing of initial public offerings (IPOs) is one of the best documented anomalies in finance. The Rock model explains this anomaly in terms of horizontal information asymmetry amongst investors. In this paper we use a comprehensive IPO data from the UK main market for the period 1989-96 to test the Rock model against several other alternatives. We propose that horizontal information asymmetry should be smaller for investment trust IPOs as compared to conventional issuing companies. The Rock model then predicts that investment trust IPOs should display less underpricing than conventional issuing companies. Our findings support the Rock model and are consistent with previous studies of investment trust IPOs. A revised version of this paper has appeared: Applied Financial Economics, vol.12(10), pp.697-706, 2002.

Keywords: Initial public offerings, investment trusts, short-run underpricing

JEL Classification: G14, G24, G25

Suggested Citation

Mudambi, Ram and Khurshed, Arif, The Short-Run Price Performance of Investment Trust Ipos on the UK Main Market (June 2001). Available at SSRN: https://ssrn.com/abstract=280788 or http://dx.doi.org/10.2139/ssrn.280788

Ram Mudambi (Contact Author)

Temple University - Department of Strategic Management ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-2099 (Phone)
215-204-8029 (Fax)

HOME PAGE: http://sbm.temple.edu/~rmudambi/index.html

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance ( email )

Crawford House
Oxford Road
Manchester, M15 6PB
United Kingdom
+44 0 161 275 4475 (Phone)
+44 0 161 275 4023 (Fax)

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