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- Publisher Website: 10.1111/0022-1082.00240
- Scopus: eid_2-s2.0-0040958428
- WOS: WOS:000087308800002
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Article: When the underwriter is the market maker: An examination of trading in the IPO aftermarket
Title | When the underwriter is the market maker: An examination of trading in the IPO aftermarket |
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Authors | |
Issue Date | 2000 |
Citation | Journal of Finance, 2000, v. 55, n. 3, p. 1039-1074 How to Cite? |
Abstract | This paper examines aftermarket trading of underwriters and unaffiliated market makers in the three-month period after an IPO. We find that the lead underwriter is always the dominant market maker; he takes substantial inventory positions in the aftermarket trading, and co-managers play a negligible role in aftermarket trading. The lead underwriter engages in stabilization activity for less successful IPOs, and uses the overallotment option to reduce his inventory risk. Compensation to the underwriter arises primarily from fees, but aftermarket trading does generate positive profits, which are positively related to the degree of underpricing. |
Persistent Identifier | http://hdl.handle.net/10722/326029 |
ISSN | 2023 Impact Factor: 7.6 2023 SCImago Journal Rankings: 19.139 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Ellis, Katrina | - |
dc.contributor.author | Michaely, Roni | - |
dc.contributor.author | O'Hara, Maureen | - |
dc.date.accessioned | 2023-03-09T09:57:31Z | - |
dc.date.available | 2023-03-09T09:57:31Z | - |
dc.date.issued | 2000 | - |
dc.identifier.citation | Journal of Finance, 2000, v. 55, n. 3, p. 1039-1074 | - |
dc.identifier.issn | 0022-1082 | - |
dc.identifier.uri | http://hdl.handle.net/10722/326029 | - |
dc.description.abstract | This paper examines aftermarket trading of underwriters and unaffiliated market makers in the three-month period after an IPO. We find that the lead underwriter is always the dominant market maker; he takes substantial inventory positions in the aftermarket trading, and co-managers play a negligible role in aftermarket trading. The lead underwriter engages in stabilization activity for less successful IPOs, and uses the overallotment option to reduce his inventory risk. Compensation to the underwriter arises primarily from fees, but aftermarket trading does generate positive profits, which are positively related to the degree of underpricing. | - |
dc.language | eng | - |
dc.relation.ispartof | Journal of Finance | - |
dc.title | When the underwriter is the market maker: An examination of trading in the IPO aftermarket | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1111/0022-1082.00240 | - |
dc.identifier.scopus | eid_2-s2.0-0040958428 | - |
dc.identifier.volume | 55 | - |
dc.identifier.issue | 3 | - |
dc.identifier.spage | 1039 | - |
dc.identifier.epage | 1074 | - |
dc.identifier.isi | WOS:000087308800002 | - |