Long run underperformance of initial public offerings: an explanation

Edward Miller
Additional contact information
Edward Miller: University of New Orleans

No 1999-18, Working Papers from University of New Orleans, Department of Economics and Finance

Abstract: Initial public offerings, even though risky, typically underperform the indices for the first few years after offering. This can be explained by high divergence of opinion raising the initial market price, and by this divergence of opinion declining over time. With time, the valuation of the price setting marginal investor comes closer to the average investor’s valuation. This theory also explains why the firms with the greatest underperformance are those with a short operating history, low sales, low prestige underwriters, low institutional ownership, high volatility, high underpricing at the time of issuance, listing on regional exchanges, and those in certain industries.

Keywords: Initial public offering (IPO); Investors; Market valuation (search for similar items in EconPapers)
JEL-codes: G12 G14 G24 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2000-02-06
References: Add references at CitEc
Citations:

Downloads: (external link)
http://louisdl.louislibraries.org/cgi-bin/showfile.exe?CISOROOT=/EFW&CISOPTR=15 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to louisdl.louislibraries.org:80 (No such host is known. )

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:uno:wpaper:1999-18

Access Statistics for this paper

More papers in Working Papers from University of New Orleans, Department of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Janet Murphy Crane ().