An Empirical Enquiry into the Speed of Information Aggregation: A Study of Ipos

43 Pages Posted: 2 Sep 2005

See all articles by Jos van Bommel

Jos van Bommel

Universite du Luxembourg - Department of Economics

Jay Dahya

Zicklin School of Business, Baruch College - The City University of New York

Zhihong Shi

SUNY College at Old Westbury

Date Written: February 2006

Abstract

This paper investigates how long it takes until dispersed information on the valuation of IPO-firms is incorporated in secondary market prices, and how the speed of information aggregation relates to market microstructure and IPO characteristics. We find that it takes one week for all IPO-related information to be reflected in the market price for 2,511 IPOs in the U.S. Using a novel methodology to gauge event-time volatility, we attribute the quick aggregation of information to bookbuilding and liquidity in the secondary market. Our results contrast with Ellul and Pagano (2005) who report slower information aggregation in U.K. fixed price IPOs.

Keywords: IPOs, market microstructure, information aggregation

JEL Classification: G14, G39

Suggested Citation

van Bommel, Jos and Dahya, Jay and Shi, Zhihong, An Empirical Enquiry into the Speed of Information Aggregation: A Study of Ipos (February 2006). EFA 2005 Moscow Meetings Paper, Available at SSRN: https://ssrn.com/abstract=676992 or http://dx.doi.org/10.2139/ssrn.676992

Jos Van Bommel (Contact Author)

Universite du Luxembourg - Department of Economics ( email )

Luxembourg

Jay Dahya

Zicklin School of Business, Baruch College - The City University of New York ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

Zhihong Shi

SUNY College at Old Westbury ( email )

Old Westbury, NY 11568-0210
United States

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