JFQ volume 37 issue 4 Front matter
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JFQ volume 37 issue 1 Front matter
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JFQ volume 37 issue 3 Front matter
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JFQ volume 37 issue 2 Front matter
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JFQ volume 37 issue 3 Back matter
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JFQ volume 37 issue 1 Back matter
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JFQ volume 37 issue 4 Back matter
In recent years, interest-rate modeling has developed rapidly in terms of both practice and theory. In this book, Riccardo Rebonato draws on his academic and professional experience to bring together and build on what theory and trading have to offer.
JFQ volume 37 issue 2 Back matter
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How Stock Flippers Affect IPO Pricing and Stabilization
Stock flippers pose a problem for underwriters of initial public offerings (IPOs). They subscribe to the issue, but immediately resell their shares, which may depress the aftermarket price. This paper presents a model of how stock flippers affect IPO pricing. The model shows that the underwriter chooses whether to price the issue as a cold, weak, or hot IPO. Stock flippers have the greatest effect on pricing in weak IPOs and provide an explanation for underwriter stabilization. In contrast to existing models of stabilization, the underwriter gains from after-market purchases, particularly if the contract with the issuer includes an over-allotment option. The over-allotment option encourages a lower offer price, which may lead to under-pricing. These results correspond to recent findings on IPO returns and underwriter stabilization activities.
Partial Adjustment to Public Information and IPO Underpricing
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.