Underpricing, underperformance and overreaction in initial pubic offerings: Evidence from investor attention using online searches

Tomas Vakrman and Ladislav Krištoufek ()

No 35, FinMaP-Working Papers from Collaborative EU Project FinMaP - Financial Distortions and Macroeconomic Performance: Expectations, Constraints and Interaction of Agents

Abstract: Online activity of Internet users has proven very useful in modeling various phenomena across wide range of scientific disciplines. In our study, we focus on two stylized facts or puzzles surrounding the initial public offerings (IPOs) - underpricing and long-term underperformance. Using the Internet searches on Google, we proxy the investor attention before and during the day of the offering to show that the high attention IPOs have different characteristics than the low attention ones. After controlling for various effects, we show that investor attention still remains a strong component of the high initial returns (underpricing), primarily for the high sentiment periods. Moreover, we demonstrate that the investor attention partially explains overoptimistic market reaction and thus also a part of the long-term underperformance.

Keywords: initial public offerings; Google Trends; puzzles (search for similar items in EconPapers)
JEL-codes: E44 G02 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-fmk and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fmpwps:35

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