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Underpricing and Index Excess Returns

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  • Nippel, Peter
  • Pierdzioch, Christian
  • Schertler, Andrea

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.

Suggested Citation

  • Nippel, Peter & Pierdzioch, Christian & Schertler, Andrea, 2005. "Underpricing and Index Excess Returns," Kiel Working Papers 1259, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1259
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    References listed on IDEAS

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    Cited by:

    1. Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre (Ed.), 2006. "Jahresbericht 2005," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 603, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.

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    More about this item

    Keywords

    underpricing; index excess returns; IT firms;
    All these keywords.

    JEL classification:

    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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