Impact of liquidity and information on the mispricing of newly public firms |
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Authors: | Joan Wiggenhorn Jeff Madura |
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Institution: | (1) Andreas School of Business, Barry University, Miami, Floria;(2) Department of Finance, College of Business, Florida Atlantic University, 777 Glades Road, P.O. Box 3091, Boca Raton, FL |
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Abstract: | We test whether the mispricing of newly public firms is affected by liquidity and information during the quiet period, from
the end of the quiet period until the lock-up expiration date, and post lock-up. Liquidity is affected by the underwriter’s
stabilization efforts during the quiet period and the founder’s ability to sell shares in the post-lockup period. Based on
a sample of winner and loser events for more than 2,600 newly public firms during 1992–2001, the degree of under-or overreaction
is conditioned on the period within the aftermarket following the IPO. We attribute the results to different liquidity and
information effects among the three periods. |
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Keywords: | |
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