Is IPO Underperformance a Peso Problem? / Andrew Ang, Li Gu, Yael V. Hochberg.

Format:

Book

Author/Creator:

Ang, Andrew.

Contributor:

National Bureau of Economic Research.

Gu, Li.

Hochberg, Yael V.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12203.

NBER working paper series no. w12203

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

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.

Notes:

Print version record

May 2006.