IPO Market Cycles:

Bubbles or Sequential Learning?

Michelle B. Lowry

Drexel University, Philadelphia, PA 19104

G. William Schwert

University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research

Journal of Finance, 57 (June 2002) 1171-1200.


Both IPO volume and average initial returns are highly autocorrelated. Further, more companies tend to go public following periods of high initial returns. However, we find that the level of average initial returns at the time of filing contains no information about that company’s eventual underpricing. Both the cycles in initial returns and the lead-lag relation between initial returns and IPO volume are predominantly driven by information learned during the registration period. More positive information results in higher initial returns and more companies filing IPOs soon thereafter.

Key words: IPO, Underpricing, Cycles, Private Information, Learning

JEL Classifications: G32, G24, G14


Cited 208 times in the SSCI and SCOPUS through 2016
© Copyright 2002, American Finance Association
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