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Journal Article

Unseasoned New Issue Price Performance on Three Tiers: 1975-1980

Brian M. Neuberger and Chris A. La Chapelle
Financial Management
Vol. 12, No. 3 (Autumn, 1983), pp. 23-28
Published by: Wiley on behalf of the Financial Management Association International
Stable URL: http://www.jstor.org/stable/3665513
Page Count: 6
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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.
Unseasoned New Issue Price Performance on Three Tiers: 1975-1980
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Abstract

This paper examines empirically whether or not there exists a significant difference in the unseasoned new issues pricing policies of underwriters in three different tiers of prestige. The study included underwriters from the classifications of prestigious and nonprestigious as earlier research. In addition, the authors analyzed the price movement patterns in a third tier defined as underwriters who manage new issues with an initial offer price of one dollar or less. Based on a sample of 118 new issues selected from this period, the authors conclude that there is a significant difference in the price appreciation of issues offered by different tiers of investment banking firms. The paper also concludes that the average excess return can be expected to be higher on new issues offered by successively lower (nonprestigious) tiers. For example, the mean excess returns for the three tiers were 5.3%, 9.6%, and 43.3%, respectively in the time period from the point of offer until one week after the offer. The results confirm studies during earlier time periods which have demonstrated that unseasoned new issues generally show excess returns.

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