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Partial Adjustment to Public Information and IPO Underpricing

Daniel J. Bradley and Bradford D. Jordan
The Journal of Financial and Quantitative Analysis
Vol. 37, No. 4 (Dec., 2002), pp. 595-616
DOI: 10.2307/3595013
Stable URL: http://www.jstor.org/stable/3595013
Page Count: 22
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Partial Adjustment to Public Information and IPO Underpricing
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Abstract

We examine the extent to which offer prices reflect public information for 3,325 IPOs over the period 1990-1999. We focus primarily on four variables: share overhang, file range amendments, venture capital backing, and previous issue underpricing. We show that 35%-50% of the variation in IPO underpricing can be predicted using public information known before the offer date and therefore conclude that IPO offer prices underadjust to widely available public information to a much greater extent than previously documented.

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