Partial Adjustment to Public Information and IPO Underpricing

Daniel J. Bradley and Bradford Jordan

Journal of Financial and Quantitative Analysis, 2002, vol. 37, issue 4, 595-616

Abstract: We examine the extent to which offer prices reflect public information for 3,325 IPOs over the period 1990–1999. We focus primarily on four variables: share overhang, file range amendments, venture capital backing, and previous issue underpricing. We show that 35%–50% of the variation in IPO underpricing can be predicted using public information known before the offer date and therefore conclude that IPO offer prices underadjust to widely available public information to a much greater extent than previously documented.

Date: 2002
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