Underpricing and Index Excess Returns

Peter Nippel, Christian Pierdzioch and Andrea Schertler ()

No 1259, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: We study the link between underpricing of initial public offerings (IPOs) and index excess returns in secondary markets. We use a theoretical model to argue that underpricing of IPOs raises investors' attention and, thereby, triggers investments in secondary markets. Our theoretical model implies that such investments should give rise to positive index excess returns in secondary markets. The results of our empirical tests, based on a dataset of stocks from the Neuer Markt and the Nouveau Marché, are in line with the implication of our theoretical model.

Keywords: underpricing; index excess returns; IT firms (search for similar items in EconPapers)
JEL-codes: G14 N24 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1259

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