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Price Bubbles of New-Technology IPOs

Author

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  • Haim Kedar-Levy

    (Ben-Gurion University of the Negev)

Abstract

Asset pricing models with atomistic agents typically relax assumptions concerning rationality and/or homogenous information in order to track endogenous bubbles. In this model, identically informed rational agents hold a Perceived Law of Motion (PLM) for a single new technology asset at IPO, yet they differ with respect to risk aversion. By mapping risk preferences to strategies, we use marginal supply and demand functions to solve for the PLM if REE holds. By relaxing the assumption of complete knowledge of agent's tastes and wealth, post-IPO bubbles emerge where the Actual Law of Motion is an amplification (bubble) of the price processes vs. the PLM.

Suggested Citation

  • Haim Kedar-Levy, 2002. "Price Bubbles of New-Technology IPOs," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 7(2), pages 11-32, Summer.
    • Handle: RePEc:pep:journl:v:7:y:2002:i:2:p:11-32
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    Cited by:

    1. Haim Kedar-Levy, 2004. "Learning the CAPM through Bubbles," Econometric Society 2004 Far Eastern Meetings 775, Econometric Society.
    2. Haim Kedar-Levy, 2007. "Why Would Financial Bubbles Evolve After New Technologies?," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 12(1), pages 83-106, Spring.

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    More about this item

    Keywords

    Initial Public Offering; IPO; Price Bubble; Technology;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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