The underpricing phenomenon in initial public offerings is explained by the greed of financial speculators

Magomet Yandiev ()
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Magomet Yandiev: Department of Economics, Lomonosov Moscow State University

No 69, Working Papers from Moscow State University, Faculty of Economics

Abstract: The article is devoted to the explanation of the reason of the post-IPO stock undervaluation phenomenon, which is quite widespread in the markets. The author shows that the first day of trading fundamentally differs from other trading days by a very large, uncharacteristic for other days volume of deals, the absolute majority of which are speculative. As a result, the real reason for the phenomenon of undervaluation is not information asymmetry, underwriter’s reputation, taxation, etc., but the profit: speculative investors expect to get the maximum income from speculating on shares whose quotations have not yet settled in the market after the IPO.

Keywords: IPO; underpricing; Russia (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 G32 G41 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2024-04
New Economics Papers: this item is included in nep-cis, nep-inv and nep-mst
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