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IPO Market Cycles: Bubbles or Sequential Learning?

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  • Michelle Lowry
  • G. William Schwert

Abstract

Both IPO volume and average initial returns are highly autocorrelated. Further, more companies tend to go public following periods of high initial returns. However, we find that the level of average initial returns at the time of filing contains no information about that company's eventual underpricing. Both the cycles in initial returns and the lead‐lag relation between initial returns and IPO volume are predominantly driven by information learned during the registration period. More positive information results in higher initial returns and more companies filing IPOs soon thereafter.

Suggested Citation

  • Michelle Lowry & G. William Schwert, 2002. "IPO Market Cycles: Bubbles or Sequential Learning?," Journal of Finance, American Finance Association, vol. 57(3), pages 1171-1200, June.
    • Handle: RePEc:bla:jfinan:v:57:y:2002:i:3:p:1171-1200
    DOI: 10.1111/1540-6261.00458
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    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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