Price Discovery from Offer Price to Opening Price of Initial Public Offerings
55 Pages Posted: 7 Jul 2021 Last revised: 11 Dec 2024
Date Written: July 1, 2023
Abstract
We examine the preopening process and price discovery from the offer price to the first open price in initial public offerings. The extent of price discovery during preopening is influenced by firm characteristics and preopening attributes, such as volume of shares executed in preopening, canceled orders, order imbalance, and changes in indicative price. Institutional investors cancel four orders for every executed order. Each phase of preopening contributes to incremental price discovery. In “hot” IPOs, almost all price discovery occurs during preopening, whereas in “cold” IPOs, half of the price adjustment occurs after the market opens.
Keywords: Initial Public Offerings, SPACs, Price Discovery, Opening Cross, Auction, Institutional Investors, Preopening
JEL Classification: G14, G23, G24, G28
Suggested Citation: Suggested Citation
Aggarwal, Reena and Wu, Yanbin, Price Discovery from Offer Price to Opening Price of Initial Public Offerings (July 1, 2023). Georgetown McDonough School of Business Research Paper No. 3874314, Available at SSRN: https://ssrn.com/abstract=3874314 or http://dx.doi.org/10.2139/ssrn.3874314
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