IPO Market Cycles: Bubbles or Sequential Learning?

Michelle Lowry, G. William Schwert

NBER Working Paper No. 7935
Issued in October 2000
NBER Program(s):   CF

We examine the strong cycles in the number of initial public offerings (IPOs) and in the average initial returns realized by investors who participated in the IPOs. At the aggregate level, initial returns are predictably related to past initial returns and also to future IPO volume from 1960-1997. To understand these patterns, we use firm-level data from 1985-97 to model the initial return. Our results show that aggregate IPO cycles occur because of the time it takes to complete an IPO, the clustering of similar types of IPOs in time, and information spillovers among IPOs.

(180 K)

Published: Lowry, Michelle and G. William Schwert. "IPO Market Cycles: Bubbles Or Sequential Learning?," Journal of Finance, 2002, v57(3,Jun), 1171-1200.

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