Chris Yung Ipo Vimeo

Chris yung ipo vimeo

Cycles in the IPO Market

Posted: 29 Dec 2009

There are 2 versions of this paper


We develop a model in which time-varying real investment opportunities lead to time-varying adverse selection in the market for initial public offerings.

Chris Yung

The model is consistent with several stylized facts known about the IPO market: economic expansions are associated with a dramatic increase in the number of firms going public, which is in turn positively correlated with underpricing. The model also makes new predictions regarding long-run IPO returns.

Chris yung ipo vimeo

Adverse selection is shown to be of procyclical severity in the sense that dispersion in unobservable quality across firms should be more pronounced during booms. Taking the premise that uncertainty will only be resolved (and thus private information revealed) over time, we test this hypothesis by looking at long-run abnormal returns and delisting rates.

Chris yung ipo vimeo

Consistent with the model, we find a) greater cross-sectional return variance and b) higher incidence of delisting during hot IPO markets.

Keywords: Initial public offerings, adverse selection, underpricing, delisting rates, nonparametric, heat measures, cross-sectional return variance

JEL Classification: C14, D82, G24, G30, G32, G33, E22, E32

Suggested Citation:Suggested Citation

Yung, Chris and Colak, Gonul and Wang, Wei, Cycles in the IPO Market.

Chris yung ipo vimeo

Journal of Financial Economics (JFE), Vol. 89, pp.

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192-208, 2008. Available at SSRN:

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