The determinants of cross-sectional liquidity in the IPO aftermarket

Yen-Sheng Lee

Applied Financial Economics, 2012, vol. 22, issue 14, 1161-1173

Abstract: This article examines the determinants of cross-sectional liquidity in the Initial Public Offering (IPO) aftermarket. Previous literature suggests that liquidity trading, information asymmetry, the extent of estimation uncertainty and heterogeneity of opinion are related to share turnover of seasoned stocks, whereas very few papers examine the factors of liquidity of newly listed firms. Because IPO stocks typically experience a volatile trading period following the IPO issuance date, I draw on the literature on trading activities and IPO firms and explore the sources, if any, of IPO liquidity during the period of 1995 through 2005. I also examine IPO attributes, such as the presence of venture capital and the number of underwriters in a syndicate. The results of random effects models suggest that liquidity trading, the mass of informed agents and certain IPO attributes play a role in explaining IPO trading activity. In contrast to previous studies on the trading activity of seasoned stocks, I find that differences of opinion and estimation uncertainty about an IPO firm have little effect on IPO liquidity. My findings contribute to the understanding of determinants of IPO liquidity.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/09603107.2011.633890 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:apfiec:v:22:y:2012:i:14:p:1161-1173

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/09603107.2011.633890

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().