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IPO Underpricing over the Very Long Run

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  • DAVID CHAMBERS
  • ELROY DIMSON

Abstract

A central measure of the efficiency of the Initial Public Offering (IPO) market is the extent to which issues are underpriced. We present new and comprehensive evidence covering British IPOs since World War I. During the period from 1917 to 1945, public offers were underpriced by an average of only 3.80%, as compared to 9.15% in the period from 1946 to 1986, and even more after the U.K. stock market was deregulated in 1986. The post-WWII rise in underpricing cannot be attributed to changes in firm composition, and occurred in spite of improvements in regulation, disclosure, and the prestige of IPO underwriters. Copyright (c) 2009 The American Finance Association.

Suggested Citation

  • David Chambers & Elroy Dimson, 2009. "IPO Underpricing over the Very Long Run," Journal of Finance, American Finance Association, vol. 64(3), pages 1407-1443, June.
  • Handle: RePEc:bla:jfinan:v:64:y:2009:i:3:p:1407-1443
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