Information Acquisition Experience, Investor Sophistication, and IPO Price Pressure

54 Pages Posted: 27 Mar 2021

See all articles by Gerrit Köchling

Gerrit Köchling

TU Dortmund University

Peter N. Posch

TU Dortmund University

Philipp Schmidtke

TU Dortmund University

Date Written: February 26, 2021

Abstract

We propose a simple measure of investor sophistication based on financial statement experience derived from publicly available EDGAR log data about accounting information acquisition activity. This approach allows us to provide unique empirical evidence for the existence of attention induced price pressure effects in the cross-section of initial public offerings, i.e. that pre-IPO-week attention from likely unsophisticated investors is associated with higher initial returns and subsequent, significant price depreciations. These results are robust to various measures of abnormal post-IPO returns, attention, and sophistication. The proposed direct experience-measurement is easily replicable and potentially useful for many other questions in economics.

Keywords: information acquisition, investor sophistication, EDGAR, price pressure, initial public offering, disclosure processing costs

JEL Classification: D83, G12, G14, G32, G41

Suggested Citation

Köchling, Gerrit and Posch, Peter N. and Schmidtke, Philipp, Information Acquisition Experience, Investor Sophistication, and IPO Price Pressure (February 26, 2021). Available at SSRN: https://ssrn.com/abstract=3793468 or http://dx.doi.org/10.2139/ssrn.3793468

Gerrit Köchling (Contact Author)

TU Dortmund University ( email )

Friedrich-Wöhler-Weg 6
Dortmund, 44227
Germany

Peter N. Posch

TU Dortmund University ( email )

Otto Hahn Str. 6
Dortmund, 44227
Germany

Philipp Schmidtke

TU Dortmund University ( email )

Friedrich-Wöhler-Weg 6
Dortmund, 44227
Germany

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