variability of IPO initial returns
By: Michelle Lowry, Micah S. Officer, G. William Schwert.
Contributors: Officer, Micah S., 1974-; Schwert, G. William 1950-; National Bureau of Economic Research.
Series: NBER working paper series -- no. 12295.; Working paper series (National Bureau of Economic Research) -- working paper no. 12295.
Publisher: National Bureau of Economic Research
Published: 2006
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 26
Subjects: Going public (Securities) -- Mathematical models
Description: "The monthly volatility of IPO initial returns is substantial and fluctuates dramatically over time.  Moreover, the monthly volatility of initial returns is significantly positively correlated with monthly mean initial returns.  This contrasts strongly with the strong negative correlation between the mean and volatility of secondary-market returns.  Consistent with IPO theory, our empirical findings suggest that information asymmetry about the firm's market value drives this positive correlation.  Specifically, months in which a greater portion of the offerings are for companies for which information asymmetry is likely to be a problem tend to have higher average initial returns and a higher volatility of initial returns.  Moreover, information asymmetry proxies are able to explain much of the positive correlation between average initial returns and the variability of initial returns, and the same proxies are significantly associated with both the level and dispersion of initial returns at the firm level"--National Bureau of Economic Research web site.
Notes: "June 2006."

Includes bibliographical references (p. 25-26).

Also available in PDF from the NBER world wide web site (www.nber.org).