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Faculty Publications
Aftermarket Support And Underpricing Of Initial Public Offerings
Document Type
Article
Keywords
IPO, Stabilization, Underwriting
Journal/Book/Conference Title
Journal of Financial Economics
Volume
35
Issue
2
First Page
199
Last Page
219
Abstract
We study the aftermarket for 72 initial public offerings (IPOs) using comprehensive trade and quote-change data from every market maker for the first three days of trading. Underwriters quote higher bid prices than other market makers for issues that commence trading at or below the offer price. Underwriters repurchase large quantities of stock in the aftermarket without risk by overselling the issue by the amount of the overallotment option. If the IPO is hot, the overallotment option is exercised. If not, the short position is covered with aftermarket selling. We discuss several reasons for underwriter support. © 1994.
Department
Department of Finance
Original Publication Date
1-1-1994
DOI of published version
10.1016/0304-405X(94)90004-3
Recommended Citation
Schultz, Paul H. and Zaman, Mir A., "Aftermarket Support And Underpricing Of Initial Public Offerings" (1994). Faculty Publications. 4350.
https://scholarworks.uni.edu/facpub/4350