A market microstructure explanation of IPOs underpricing

Patrick Leoni ()

Economics Letters, 2008, vol. 100, issue 1, 47-48

Abstract: In an IPO game with first-price auctions, we show that the noisier the inferences of risk-averse rational investors about the firm's value (in the sense of first-order stochastic dominance) the higher the underbidding. Underpricing occurs independently of winner's curse effects.

Date: 2008
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Working Paper: A market microstructure explanation of IPOs underpricing (2007)
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