Price Bubbles of New-Technology Ipos

Journal of Entrepreneurial Finance & Business Ventures, Vol. 7, No. 2, pp. 11-32, 2002

31 Pages Posted: 29 Mar 2005

See all articles by Haim Kedar-Levy

Haim Kedar-Levy

Ben Gurion University of the Negev - Guilford Glazer Faculty of Business and Management

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Abstract

Asset pricing models with atomistic agents typically relax assumptions concerning rationality and/or homogenous information in order to track endogenous bubbles. In this model, identically informed rational agents hold a Perceived Law of Motion (PLM) for a single new technology asset at IPO, yet they differ with respect to risk aversion. By mapping risk preferences to strategies, we use marginal supply and demand functions to solve for the PLM if REE holds. By relaxing the assumption of complete knowledge of agent's tastes and wealth, post-IPO bubbles emerge where the Actual Law of Motion is an amplification (bubble) of the price processes vs. the PLM.

Keywords: IPO, New Technology, Incomplete Information, Bubbles

JEL Classification: D81, E44, G11, G12

Suggested Citation

Kedar-Levy, Haim, Price Bubbles of New-Technology Ipos. Journal of Entrepreneurial Finance & Business Ventures, Vol. 7, No. 2, pp. 11-32, 2002, Available at SSRN: https://ssrn.com/abstract=678721

Haim Kedar-Levy (Contact Author)

Ben Gurion University of the Negev - Guilford Glazer Faculty of Business and Management ( email )

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