IPO Market Cycles: Bubbles or Sequential Learning?
G. William Schwert
University of Rochester - Simon Business School; National Bureau of Economic Research (NBER)
Journal of Finance, Vol. 57, pp. 1171-1200, 2002
Both IPO volume and average initial returns are highly autocorrelated. Further, more companies tend to go public following periods of high initial returns. However, we find that the level of average initial returns at the time of filing contains no information about that company's eventual underpricing. Both the cycles in initial returns and the lead-lag relation between initial returns and IPO volume are predominantly driven by information learned during the registration period. More positive information results in higher initial returns and more companies filing IPOs soon thereafter.
Date posted: November 29, 2003