6) Evidence on IPO underpricing is provided in several empirical studies, including a seminal paper by...

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6) Evidence on IPO underpricing is provided in several empiricalstudies, including a seminal paper by Loughran and Ritter (2004).7) On average, IPOs traded at a premium and one reason can beunderpricing of IPO at the offer time. Briefly discuss whether thisresult is consistent with previous empirical studies (Loughran andRitter (2004)about IPO traded at premium if they were underpricedat offer time.

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Ans The purpose of this study is to provide empirical evidence for the phenomenon of underpricing of Initial Public Offerings On the basis of sample IPOs from the NYSE and NASDAQ exchanges the underpricing of stock IPOs is found to still be prevalent after the information technology bubble petered out in the early 21st century A model has been developed to analyze the accuracy of a number of theories put forward to explain this underpricing some which have not been the object of a comprehensive investigation yet The results indicate that underpricing can in part be explained by the informational asymmetry between the underwriters issuing firms and investors Furthermore IPO underpricing is found to exhibit mild cyclicality and seasonality and variations across economic sectors Finally this study See Answer

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