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Underpricing of Newly Issued Bonds: Evidence from the Swiss Capital Market

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  • Wasserfallen, Walter
  • Wydler, Daniel

Abstract

The pricing of newly issued bonds on the Swiss capital market is investigated over the years 1980-82. The results reveal a slight underpricing of new bonds at the issue date that is roughly equal to the difference in transactions costs between the markets for new and seasoned bonds. Underpricing is no longer observed when the new bonds start to be traded on the stock exchange, that is, after about two days. Tests of several hypothesis show that unexpected changes in interest rates over the offering period explain part of the underpricing. Copyright 1988 by American Finance Association.

Suggested Citation

  • Wasserfallen, Walter & Wydler, Daniel, 1988. " Underpricing of Newly Issued Bonds: Evidence from the Swiss Capital Market," Journal of Finance, American Finance Association, vol. 43(5), pages 1177-1191, December.
  • Handle: RePEc:bla:jfinan:v:43:y:1988:i:5:p:1177-91
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    Cited by:

    1. Angelo Ranaldo & Enzo Rossi, 2016. "Uniform-price auctions for Swiss government bonds: Origin and evolution," Economic Studies 2016-10, Swiss National Bank.
    2. Jun-Koo, Kang & Lee, Yul W., 1996. "The pricing of convertible debt offerings," Journal of Financial Economics, Elsevier, vol. 41(2), pages 231-248, June.
    3. Christopher M. Bilson & Timothy J. Brailsford & Luke J. Sullivan & Sirimon Treepongkaruna, 2008. "Pricing Bonds in the Australian Market," Australian Journal of Management, Australian School of Business, vol. 33(1), pages 123-143, June.
    4. Ismailescu, Iuliana & Phillips, Blake, 2015. "Credit default swaps and the market for sovereign debt," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 43-61.
    5. Arie Melnik & Doron Nissim, 2003. "Debt issue costs and issue characteristics in the Eurobond market," ICER Working Papers 09-2003, ICER - International Centre for Economic Research.
    6. repec:kap:sbusec:v:50:y:2018:i:2:d:10.1007_s11187-016-9833-7 is not listed on IDEAS
    7. Gorton, Gary, 1996. "Reputation Formation in Early Bank Note Markets," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 346-397, April.

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