IPO underpricing,signaling, and property returns

This paper investigates whether IPO signals reveal proprietary information about the prospects of an issuing firm’s underlying industry. By analyzing a sample of European property company (EPC) IPOs from 1997 to 2007, we take advantage of a heterogeneous set of industry performance measures, i.e., yields and total returns of direct property investments in various European property markets that can be clearly assigned to each individual IPO. The results reveal that the main signal of interest, underpricing, is in fact positively related to average property yields for a 12-month post-IPO period; a result that supports our assumption. Other signals, as proposed in previous research, do not appear to contain any information about the prospects of the IPO firm’s target property investment market. We also show that total returns seem to be a biased measure for direct property performance. Further tests for the signaling model’s preconditioned presence of information asymmetry among EPCs reveal that underpricing levels are a function of company-specific ex ante uncertainty proxies. In contrast, property-specific ex ante uncertainty proxies do not explain underpricing levels.     

The probability of a “gross” violation of an efficient markets variance inequality

This note considers the small sample bias of the empirical variances of observed and ex-post-rational prices of financial assets, and shows that this can be much more severe than has previously been thought.     

Bedrohlicher Wirtschaftspatriotismus

Ohne Zusammenfassung     

A politicoeconomic model of wage inflation

Summary The paper employs a public choice perspective to develop a model of centralized union wage bargaining. The actors considered are political parties, employers' federations, voters, union officials and members of the rank and file, with the emphasis being put on the latter three. Control theory is used to analyze bargaining outcomes in a dynamic context. The theoretical consequences of the model, which stress the importance of political variables such as government ideology, preferences of the rank and file members, election dates and the degree of union centralization on wage inflation, are supported by West German data.Helpful comments from Chris Goodrich and an anonymous referee of this Journal are gratefully acknowledged.     

Efficiency and the production function

Journal of Economics -