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Modelling the behaviour of the new issue market |
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| Authors: | Tim Brailsford Richard Heaney Jing Shi |
| Affiliation: | a UQ Business School, University of Queensland, Brisbane QLD 4072, Australia b School of Finance and Applied Statistics, The Australian National University, Canberra ACT 0200, Australia c School of Economics & Finance, RMIT University, Melbourne VIC 3000, Australia |
| Abstract: | This paper analyses the time series behaviour of the initial public offering (IPO) market using an equilibrium model of demand and supply that incorporates the number of new issues, average underpricing, and general market conditions. Model predictions include the existence of serial correlation in both the number of new issues and the average level of underpricing, as well as interactions between these variables and the impact of general market conditions. The model is tested using 40 years of monthly IPO data. The empirical results are generally consistent with predictions. |
| Keywords: | IPOs Hot issue markets Stock market Momentum |
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