Primary market characteristics and secondary market frictions of stocks
MetadataShow full item record
Boehme, R., and G. Colak. 2012. "Primary market characteristics and secondary market frictions of stocks".Journal of Financial Markets. 15 (2): 286-327.
We analyze the primary market characteristics and the secondary market trading frictions of new stocks. IPOs issued in hot markets, with low offer price, low-reputation underwriters or no VC backing face higher liquidity frictions, higher information constraints, and worse short-sale constraints. Underpriced IPOs are more liquid and more recognizable, but they have higher idiosyncratic risk and higher short-sale constraints. Also, we find an interesting time trend in the evolution of the new stocks' trading frictions: the mean-reversion of an average IPO stock toward a typical seasoned stock takes more than a few years. We propose a quality-based explanation for these findings.
Click on the DOI link below to access the article (may not be free).