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An empirical investigation of the speed of information aggregation: a study of IPOs

Author

Listed:
  • Jos Van Bommel
  • Jay Dahya
  • Zhihong Shi

Abstract

This paper researches the microstructure of the price process after the IPO, to gain insight into the information aggregation process of secondary market trading. We investigate a sample of 2,040 US IPOs between 1993 and 2000 and find that it takes approximately one week for all IPO-related information to be reflected in the market price. Using a novel methodology to gauge event-time volatility, we attribute this fast information aggregation to the bookbuilding process and to the extraordinary liquidity in the IPO aftermarket.

Suggested Citation

  • Jos Van Bommel & Jay Dahya & Zhihong Shi, 2010. "An empirical investigation of the speed of information aggregation: a study of IPOs," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 2(1), pages 47-79.
    • Handle: RePEc:ids:injbaf:v:2:y:2010:i:1:p:47-79
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