IPO Pricing and the Relative Importance of Investor Sentiment: Evidence from Germany

Andreas Oehler, Marco Rummer and Peter Smith

No 26, Discussion Papers from University of Bamberg, Chair of Finance

Abstract: The underpricing phenomenon of Initial Public Offerings (IPOs) has been widely studied across different stock markets around the world and has often been explained to be as a result of asymmetrically distributed information and ex-ante uncertainty. However, as Ritter and Welch (2002) argue to the contrary, these theories are unlikely to explain the persistent pattern of high initial returns during the first trading day as well as other features of the returns data. This paper add some further alternative explanations to the traditional theory while focusing on German IPOs during the 1997 to 2001 period and covering a sample of 410 firms. Using time series regressions the cyclical behaviour of the issue activity is examined and we report, using VAR analysis, that lagged underpricing and IPO volume influence the decision to go public. The cross-sectional regression analysis, using both censored and uncensored data, shows that the initial returns are mainly influenced by investor sentiment and demand, and less by ex-ante uncertainty, especially during the dot-com boom.

Keywords: Initial Public Offerings (IPO); Underpricing; Investor Sentiment; Hot-issue Markets; Ex-ante Uncertainty (search for similar items in EconPapers)
JEL-codes: G10 G12 G24 G32 (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/22501/1/bafifo26.pdf (application/pdf)

Related works:
Working Paper: IPO Pricing and the Relative Importance of Investor Sentiment: Evidence from Germany (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamfin:26

Access Statistics for this paper

More papers in Discussion Papers from University of Bamberg, Chair of Finance
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().