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The Distribution of Information Among Institutional and Retail Investors in IPOs

16 Pages Posted: 18 Mar 2003  

Matti Keloharju

Aalto University - School of Business; Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Sami Torstila

Aalto University

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Abstract

This study examines investor performance in IPOs using a unique database comprising 85,384 investors and 29 offerings from Finland. The evidence indicates that on average institutional investors do not obtain larger initial returns than retail investors, as the incentive to acquire information is limited by allocation rules which favour small orders. This result is in contrast to findings by Aggarwal et al. (2002), who show that institutional investors perform better in a bookbuilding environment. Within each investor category, however, large orders are associated with the best performance, suggesting that information differences figure more importantly within rather than between categories.

Keywords: IPO's, Investment Performance, Institutional Investors, Retail Investors

JEL Classification: G32, G14

Suggested Citation

Keloharju, Matti and Torstila, Sami, The Distribution of Information Among Institutional and Retail Investors in IPOs. European Financial Management, Vol. 8, pp. 357-372, 2002. Available at SSRN: https://ssrn.com/abstract=330055

Matti Keloharju (Contact Author)

Aalto University - School of Business ( email )

P.O. Box 21210
AALTO, FI-00076
Finland
+358 40 353 8043 (Phone)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Sami Torstila

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland
+358 40 353 8069 (Phone)

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