Underpricing of initial public offerings in experimental asset markets

Füllbrunn, Sascha; Neugebauer, Tibor; Nicklisch, Andreas

doi:10.1007/s10683-019-09638-7

Cited by 18 publications

(10 citation statements)

References 79 publications

(93 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…However, aftermarket prices are less accurate for bookbuilding, as our results show. 19 The high level of control in experimental settings, with the possibility to randomize participants to treatments to facilitate a causal interpretation, has led to experimental studies on IPO pricing (e.g., Weber, Duffy & Schram, 2018;Füllbrunn & Neugebauer, 2019). However, the high level of control in the laboratory comes at the expense of lower external validity, and meaningful estimates of magnitudes relevant for the world outside the laboratory can only seldomly be obtained.…”

Section: Limitationsmentioning

confidence: 99%

IPO Underpricing and Aftermarket Price Accuracy: Auctions vs. Bookbuilding in Japan

Lehmann

Weber

2021

SSRN Journal

View full text Add to dashboard Cite

We analyse a regulatory change in the Japanese IPO market that created an abrupt shift from hybrid price-discriminatory auctions to bookbuilding. We find that bookbuilding leads to significantly higher underpricing than hybrid price-discriminatory auctions. Further, we find evidence that price accuracy tends to be higher for auctions than for bookbuilding. The results hold under a variety of OLS specifications and with regression discontinuity designs exploiting the abrupt change of the regulation. The results suggest that the interests of issuers and underwriters are not aligned. The popularity of bookbuilding seems puzzling from this perspective.

show abstract

Section: Limitationsmentioning

confidence: 99%

IPO Underpricing and Aftermarket Price Accuracy: Auctions vs. Bookbuilding in Japan

Lehmann

Weber

2021

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…Most of these experimental asset markets let participants trade financial assets with others making use of a continuous double auction or a call market mechanism. 1 The finding that bubbles disappear when identical markets are repeated is very robust in these settings, in which participants trade for a finite number of periods, with usually about 10-20 periods per market (e.g., Smith et al, 1988;King et al, 1993;Van Boening et al, 1993;Dufwenberg et al, 2005;Haruvy et al, 2007;Hussam et al, 2008; the findings can even persist in considerably more difficult variations, e.g., Füllbrunn et al, 2014a;Weber et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

Experience Does not Eliminate Bubbles: Experimental Evidence

Kopányi-Peuker

Weber

2018

SSRN Journal

View full text Add to dashboard Cite

We study the role of experience in the formation of asset price bubbles. Therefore, we conduct two related experiments. One is a call market experiment in which participants trade assets with each other. The other is a learning-to-forecast experiment in which participants only forecast future prices, while the trade, which is based on these forecasts, is computerized. Each experiment comprises three treatments that vary the amount of information about the fundamental value that participants receive. Each market is repeated three times. In both experiments and in all treatments, we observe sizable bubbles. These bubbles do not disappear with experience. Our findings in the call market experiment stand in contrast to the literature. Our findings in the learningto-forecast experiment are novel. Interestingly, the shape of the bubbles is different between the two experiments. We observe flat bubbles in the call market experiment and boom-and-bust cycles in the learning-to-forecast experiment.

show abstract

“…Most experimental asset markets let participants trade financial assets with others making use of a continuous double auction or a call market mechanism. 1 The finding that bubbles disappear when identical markets are repeated is very robust in these settings, in which participants trade for a finite number of periods, with usually about 10-20 periods per market (e.g., Smith et al, 1988;King et al, 1993;Van Boening et al, 1993;Dufwenberg et al, 2005;Haruvy et al, 2007;Hussam et al, 2008; the findings can even persist in considerably more difficult variations, e.g., Füllbrunn et al, 2014a;Weber et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

Experience Does not Eliminate Bubbles: Experimental Evidence

Kopányi-Peuker¹,

Weber²

2018

Preprint

View full text Add to dashboard Cite

We study the role of experience in the formation of asset price bubbles. Therefore, we conduct two related experiments. One is a call market experiment in which participants trade assets with each other. The other is a learning-to-forecast experiment in which participants only forecast future prices, while the trade, which is based on these forecasts, is computerized. Each experiment comprises three treatments that vary the amount of information about the fundamental value that participants receive. Each market is repeated three times. In both experiments and in all treatments, we observe sizable bubbles. These bubbles do not disappear with experience. Our findings in the call market experiment stand in contrast to the literature. Our findings in the learning- to-forecast experiment are novel. Interestingly, the shape of the bubbles is different between the two experiments. We observe flat bubbles in the call market experiment and boom-and-bust cycles in the learning-to-forecast experiment.

show abstract

Underpricing of initial public offerings in experimental asset markets

Cited by 18 publications

References 79 publications

IPO Underpricing and Aftermarket Price Accuracy: Auctions vs. Bookbuilding in Japan

IPO Underpricing and Aftermarket Price Accuracy: Auctions vs. Bookbuilding in Japan

Experience Does not Eliminate Bubbles: Experimental Evidence

Experience Does not Eliminate Bubbles: Experimental Evidence

Contact Info

Product

Resources

About