Are IPOs underpriced or overpriced?
: testing for bubbles in IPOs : empirical analysis

  • Roberto Pedro (Student)

Student thesis: Master's Thesis

Abstract

This dissertation introduces a new type of procedure to detect ex-ante explosive behaviour in the post-issue short term stock performance of newly listed firms in the USA, using a new type of data, intraday quotes. Contrarily to most literature this dissertation does not focus on understanding if IPOs are underpriced or overpriced, but on detecting if the stock performance of the newly listed firm is having an explosive behaviour or not and in data stamping that explosiveness and a possible collapse. This work shows that this new detection mechanism has been able to find that some IPOs had an explosive process immediately after the IPO and it has been possible to determine the date of the beginning of the exuberant behaviour and the collapse. However, this test has detected explosive processes in overpriced IPOs, meaning that the stock price showed an opposite behaviour of explosiveness, therefore it is important to make a complete case-by-case analysis. Moreover, this dissertation presents a comprehensive analysis about ReWalk Robotics Ltd, a company in which has been detected initial exuberance, although it has underperformed almost a year after its IPO date.
Date of Award7 Jul 2016
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorPaulo Alves (Supervisor)

Keywords

  • Recursive right tailed unit roots test
  • Initial public offerings
  • Explosive processes

Designation

  • Mestrado em Finanças

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