Is IPO Underperformance a Peso Problem?
Recent studies suggest that the underperformance of IPOs in the post-1970 sample may be a small sample effect or "Peso" problem. That is, IPO underperformance may result from observing too few star performers ex-post than were expected ex-ante. We develop a model of IPO performance that captures this intuition by allowing returns to be drawn from mixtures of outstanding, benchmark, or poor performing states. We estimate the model under the null of no ex-ante average IPO underperformance and construct small sample distributions of various statistics measuring IPO relative performance. We find that small sample biases are extremely unlikely to account for the magnitude of the post-1970 IPO underperformance observed in data.
-
-
Copy CitationAndrew Ang, Li Gu, and Yael V. Hochberg, "Is IPO Underperformance a Peso Problem?," NBER Working Paper 12203 (2006), https://doi.org/10.3386/w12203.Download Citation
Published Versions
Ang, Andrew, Li Gu and Yael Hochberg. “Is IPO Underperformance a Peso Problem?” Journal of Financial and Quantitative Analysis 42, 3 (2007): 565-594. citation courtesy of 
Related
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
