Hot market, inventor setimrnt and IPO pricing
➤ Gửi thông báo lỗi ⚠️ Báo cáo tài liệu vi phạmNội dung chi tiết: Hot market, inventor setimrnt and IPO pricing
Hot market, inventor setimrnt and IPO pricing
Hot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing ess SchoolRajdeep SinghUniversity of MinnesotaNovember f>, 2003We arc grateful to Aydogan Ahi, Peter Bossacrts, Robert Bloomfield, Rachel Croson. Thomas Hellmann. David iiirshleifer, Pete Kyle, Ross Levine. Katharina Lewellen, James Montier, Lasse Pedersen, Enrico Perotti, Jay Ritter. Ann Sherman, N Hot market, inventor setimrnt and IPO pricing eal Stoughton, Bill Wilhelm, Jeff Wurgler, and seminar participants at the 12th Utah Winter Finance Conference, the Fourth Texas Finance Festival, theHot market, inventor setimrnt and IPO pricing
First EVI Conference (Yale 2002), the RES Conference on Experimental Finance (Mannheim 2002), 1NSEAD. New York University, American University, the UHot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing 01-2002 Prise for Best Faculty Research in Finance. Address correspondence to: Alexander l.jung<|vist, Salomon Center. Stern School of Business, New York University, 44 West Fourth Street, Suite ii-ltio, New York. NY 10012. Phone 212-998-0304. Fax 212-995-4220. E-mail aljungqvftstcm.nyu.edu.Hot Mark Hot market, inventor setimrnt and IPO pricing ets, Investor Sentiment, and IPO PricingAbstractWo model an 11*0 company’s optimal response to the presence of sentiment investors and short sale consHot market, inventor setimrnt and IPO pricing
t raints. Given regulatory constraints on price discrimination, t he optimal mechanism involves the issuer allocating stock to ‘regular’ institutionalHot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing ematurely, carrying 11’0 stock in inventory is risky, so to break even in expectation regulars require the stock to l>0 underpriced even in the absence of asymmetric informat ion. However, the offer price still exceeds fundamental value, as ii capitalizes the regulars’ expected gain from trading wit Hot market, inventor setimrnt and IPO pricing h the sentiment investors. This resolves the apparent paradox t hat issuers, while shrewdly t iming their IPOs to take advantage of optimistic valuatiHot market, inventor setimrnt and IPO pricing
ons, appear not to price t heir stock very aggressively. The model generates a number of new and refutable empirical predictions regarding t he extentHot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing ublic [Ritter and Welch (2002)]. initial public offerings (IPOs) exhibit positive first day returns on average and so seem to be ‘underpriced'. The initial price run up appears to be undone in subsequent months as IPO stocks underperform the market.1 2 Hence, from the vantage of a longer horizon, IP Hot market, inventor setimrnt and IPO pricing Os can arguably he regarded as ‘overpriced’ in t he after-market. The strengt h of these patterns varies over time, with both the initial price run upHot market, inventor setimrnt and IPO pricing
and subsequent underperformance more dramatic in hot' periods of high IPO volume [Hitter (1984, 1991)]. Firms may even be able to ‘time’ t heir IPO tHot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing . There are numerous models of ll’O underpricing, typically based on investor rationality in incomplete information settings, but those have shod little light on the long-run performance of IPOs? Work on long-run performance is primarily empirical and emphasizes the role of investor sentiment and bo Hot market, inventor setimrnt and IPO pricing unded rationality in explaining the price behavior of IPO stocks. The impact of investor sentiment is regarded its Itfirticularly acute in hot marketsHot market, inventor setimrnt and IPO pricing
. Over time, investor exuberance fades, resulting in long-run undcrperformance. Loughran, Ritter, and Rydqvist (1994) go further in claiming that issuHot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing ies go public when investor sentiment is high. Such patterns can persist if rational investors an* dissuaded by the cost of implementing arbitrage strategies [Shleifcr and Vislmy (1997), Lamont and Thaler (2093)].The behavioral story sketched above has some obvious appeal, but it raises an apparent Hot market, inventor setimrnt and IPO pricing paradox: if issuers are regarded as rat ional and shrewd enough to choose a hot market in which1 There is a debate in the literature as to whether IFOHot market, inventor setimrnt and IPO pricing
s really do underperform. Ritter (1991) shows that they underperform the index, while Brav arid G<»m[>crs (1997) and Brav, Gixxy, and Gompcrs (21100) Hot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing O firms appear lo perform no worse than similar firms (i.e. small ami high-growth companies). The evidence in these later papers is consistent with the (xrsihilil.y that investors gel. optimistic about small and high-growth firm stocks, not just IPO stocks, and firms choose to go public at that time Hot market, inventor setimrnt and IPO pricing . Our model takes this as a given and derives pricing implications from issuers' optimizing behavior.2Among these are explanations based on the ‘winneHot market, inventor setimrnt and IPO pricing
r’s curse’ [Rock (1986)1, signaling [Allen and Faulhaber (1989). Welch (1989)], cascades [Welch (1992)], and investor incentives to reveal informationHot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing e t hat t he presence of sentiment investors could lead to higher offer prices and a lower level of underpricing as rational issuers take advantage of them. Reconciling the simultaneous existence of underpricing and long-run underperformance t hus requires additional structure on the behavioral assu Hot market, inventor setimrnt and IPO pricing mptions and the nat ure of the economic environment.The task we set ourselves in the |>apor is, therefore, to develop a model of 11’0 pricing in hot iHot market, inventor setimrnt and IPO pricing
ssue markets that elucidates the connection between underpricing and long-run underperformance. We ask. what should a profit-maximizing issuer do in tHot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing lus under the exuberant, investors' demand curve, in a setting where demand may build over time. We derive an optimal mechanism (which we argue is consistent with institutional reality) that achieves the issuer’s first-best outcome.The model starts with the premise that, some investors may, on occas Hot market, inventor setimrnt and IPO pricing ion, be ‘irrationally exuberant." about the prospects of ll’Os from, say, a part icular industry. Assuming constraints on short sales, this is consistHot market, inventor setimrnt and IPO pricing
ent with the presence of long-run 11’0 undcrpcrformancc.3 More interestingly, the model suggests possible connections between 11’0 tmdcrpcrformancc anHot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing vestors for gradual sale to sentiment investors as t hoy arrive in t he market over t ime. Regulars maint ain stock prices thereby extracting surplus from sentiment investors by holding 11’0 stock in inventory and restricting the availability of shares. Underpricing emerges as fair compensation to t Hot market, inventor setimrnt and IPO pricing he regulars for expected inventory losses arising from the possibility that sentiment demand may cease. In return, the expropriation of value from seHot market, inventor setimrnt and IPO pricing
ntiment investors Is capitalize*! into a higher offer price than would otherwise I)C t he case.For the inventory holding strategy to be implemented, tHot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing selling their 11’0 allocations prematurely. To deter cheating, it may 1)03In a different setting Miller (1977) shows that a divergence of beliefs similar to the notion that some investors arc more optimistic than others can lead to long-run IPO nndcrpcrformancc.necessary for the underwriter to punis Hot market, inventor setimrnt and IPO pricing h deviations from t he equilibrium strategy. We show that the degree of the underwriter's ability to impose penalties determines the optimal size of aHot market, inventor setimrnt and IPO pricing
n offer, the extent of underpricing, and subsequent long-run performance.It Is worth emphasizing that when there is a dominant investor or when the unHot Markets, Investor Sentiment, and IPO PricingAlexander 1*. LjungqvislNYU Stern School of Business and CEPRVikram NandaUniversity of Michigan Busine Hot market, inventor setimrnt and IPO pricing higher offer price. In the economic environment we model, issuers cannot do better by the use of alternative ways to sell equity. For instance, if the Issuer wore to engage in a quick succession of equity offerings (an 11’0 followed by seasoned offerings), the value obtained would not exceed t he va Hot market, inventor setimrnt and IPO pricing lue from t he inventory holding process wo model. In any case, issuing stock repeatedly over a short period is implausible, given significant economieHot market, inventor setimrnt and IPO pricing
s of scale in issuing costs and the necessity to satisfy registration and disclosure requirements repeatedly.Our paper has a focus quit e different frGọi ngay
Chat zalo
Facebook