Atanu Saha & Allen Ferrell, an asymmetric payoff-based explanation of ipo "underpricing
Contributors: John M. Olin Center for Law, Economics, and Business
Series: Discussion paper -- no. 587; Discussion paper (John M. Olin Center for Law, Economics, and Business : Online) -- no. 587.
Publisher: Harvard Law School
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource]
Description: "The widely studied phenomenon of underpricing of new issues of common stock can be explained by underwriters' payoff asymmetry.  Under uncertain investors' demand for a new issue, the underwriter's downside risk if he overestimates demand can be significantly larger than the upside potential when he underestimates demand.  To protect himself from the large downside risk of overestimating demand, the underwriter rationally chooses a lower offer price than he would have in the absence of demand uncertainty"--John M. Olin Center for Law, Economics, and Business web site.
Notes: Title from PDF file as viewed on 6/28/2007.

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