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Journals
Publication year
Price Discovery in Initial Public Offerings and the Role of the Lead Underwriter
Resource type
Authors/contributors
- Aggarwal, Reena (Author)
- Conroy, Pat (Author)
Title
Price Discovery in Initial Public Offerings and the Role of the Lead Underwriter
Abstract
We examine the price discovery process of initial public offerings (IPOs) using a unique dataset. The first quote entered by the lead underwriter in the five‐minute preopening window explains a large proportion of initial returns even for hot IPOs. Significant learning and price discovery continues to take place during these five minutes with hundreds of quotes being entered. The lead underwriter observes the quoting behavior of other market makers, particularly the wholesalers, and accordingly revises his own quotes. There is a strong positive relationship between initial returns and the time of day when trading starts in an IPO.
Publication
The Journal of Finance
Volume
55
Issue
6
Pages
2903-2922
Date
2000
Citation
Aggarwal, R., & Conroy, P. (2000). Price Discovery in Initial Public Offerings and the Role of the Lead Underwriter. The Journal of Finance, 55, 2903–2922.
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