Auctions versus book-built IPOs in Japan: A comparison of aftermarket volatility

Richard H. Pettway, Satish Thosar and Scott Walker ()

Pacific-Basin Finance Journal, 2008, vol. 16, issue 3, 224-235

Abstract: In a recent theoretical paper, Sherman [Sherman, A.E., 2005, Global trends in IPO methods: Book building versus auctions with endogenous entry, Journal of Financial Economics 78, 615-649.] proposes that: "If book building leads to greater expected underpricing relative to uniform price or discriminatory auctions, then it should also lead to less volatility in aftermarket trading...". In this paper, we study a Japanese sample and find that book-built IPOs exhibit greater underpricing and higher aftermarket volatility compared to price-discriminatory auctions. Aftermarket volatility wanes with seasoning in both sub-samples, but the book-built volatility levels are persistently higher than those for auctions for as long as one year after the IPO issue date.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:16:y:2008:i:3:p:224-235

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