A Reassessment Of The Excess Return Phenomenon For Initial Public Offerings Of Common Stock

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Glenn A. Wolfe
Elizabeth S. Cooperman

Keywords

underpricing for new issues of common stock, issue size, risk, offer price

Abstract

This study examines the relationship between underpricing for new issues of common stock and issue size (offer price and number of shares) after controlling for an issues risk. Both risk and offer price are found to be significant factors in explaining underpricing. Offer price dominates as an explanatory variable in cold issue markets, while risk dominates in hot issue markets.

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