Title: An empirical investigation of the speed of information aggregation: a study of IPOs

Authors: Jos Van Bommel, Jay Dahya, Zhihong Shi

Addresses: Said Business School, University of Oxford, Park End Street, Oxford, OX1 1HP, UK. ' Zicklin School of Business, Baruch College, CUNY, One Bernard Baruch Way, New York, NY 10010, USA. ' Old Westbury, SUNY, P.O. Box 210, Old Westbury, NY 11568-0210, USA

Abstract: This paper researches the microstructure of the price process after the IPO, to gain insight into the information aggregation process of secondary market trading. We investigate a sample of 2,040 US IPOs between 1993 and 2000 and find that it takes approximately one week for all IPO-related information to be reflected in the market price. Using a novel methodology to gauge event-time volatility, we attribute this fast information aggregation to the bookbuilding process and to the extraordinary liquidity in the IPO aftermarket.

Keywords: market microstructure; initial public offerings; IPOs; information aggregation; volatility; secondary market trading.

DOI: 10.1504/IJBAAF.2010.031575

International Journal of Banking, Accounting and Finance, 2010 Vol.2 No.1, pp.47 - 79

Published online: 11 Feb 2010 *

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