Investors and Choice Overload: Evidence from IPOs
34 Pages Posted: 18 Aug 2017
Date Written: August 18, 2017
This paper provides evidence consistent with retail investors experiencing choice overload when presented with an increasing number of IPOs to choose from. We find that both the average first day return and trading volume are lower in weeks with higher number of IPOs. However, with more IPOs, average return during the week following the first day of trading is higher. These findings suggest that proliferation of choices either debilitates or delays investor participation due to cognitive limitations.
Keywords: IPO, Behavioral Finance
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