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IPO Market Cycles: Bubbles or Sequential Learning?

  • Michelle Lowry
  • G. William Schwert

We examine the strong cycles in the number of initial public offerings (IPOs) and in the average initial returns realized by investors who participated in the IPOs. At the aggregate level, initial returns are predictably related to past initial returns and also to future IPO volume from 1960-1997. To understand these patterns, we use firm-level data from 1985-97 to model the initial return. Our results show that aggregate IPO cycles occur because of the time it takes to complete an IPO, the clustering of similar types of IPOs in time, and information spillovers among IPOs.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7935.

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Date of creation: Oct 2000
Date of revision:
Publication status: published as Lowry, Michelle and G. William Schwert. "IPO Market Cycles: Bubbles Or Sequential Learning?," Journal of Finance, 2002, v57(3,Jun), 1171-1200.
Handle: RePEc:nbr:nberwo:7935
Note: CF
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  1. Randolph P. Beatty & Jay R. Ritter, . "Investment Banking, Reputation and the Underpricing of Initial Public Offerings," Rodney L. White Center for Financial Research Working Papers 02-85, Wharton School Rodney L. White Center for Financial Research.
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  9. Ritter, Jay R, 1991. " The Long-run Performance of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(1), pages 3-27, March.
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  11. Tim Loughran & Jay R. Ritter, 2002. "Why Don't Issuers Get Upset About Leaving Money on the Table in IPOs?," Review of Financial Studies, Society for Financial Studies, vol. 15(2), pages 413-444, March.
  12. Hanley, Kathleen Weiss, 1993. "The underpricing of initial public offerings and the partial adjustment phenomenon," Journal of Financial Economics, Elsevier, vol. 34(2), pages 231-250, October.
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  15. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
  16. Choe, Hyuk & Masulis, Ronald W. & Nanda, Vikram, 1993. "Common stock offerings across the business cycle : Theory and evidence," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 3-31, June.
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