An empirical investigation of the speed of information aggregation: a study of IPOs

Jos van Bommel (), Jay Dahya and Zhihong Shi

International Journal of Banking, Accounting and Finance, 2010, vol. 2, issue 1, 47-79

Abstract: This paper researches the microstructure of the price process after the IPO, to gain insight into the information aggregation process of secondary market trading. We investigate a sample of 2,040 US IPOs between 1993 and 2000 and find that it takes approximately one week for all IPO-related information to be reflected in the market price. Using a novel methodology to gauge event-time volatility, we attribute this fast information aggregation to the bookbuilding process and to the extraordinary liquidity in the IPO aftermarket.

Keywords: market microstructure; initial public offerings; IPOs; information aggregation; volatility; secondary market trading. (search for similar items in EconPapers)
Date: 2010
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