Download or read book Is the Investor Sentiment Approach the Solution to the IPO Underpricing Phenomenon? written by Andreas Oehler and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The underpricing phenomenon of Initial Public Offerings (IPOs) has been widely studied across different stock markets around the world and has often been explained to be a result of asymmetrically distributed information and ex-ante uncertainty. However, as Ritter and Welch (2002) argue, these theories are unlikely to explain the persistent pattern of high initial returns during the first trading day. This paper focuses on the importance of investor sentiment and of information gathered by the underwriter before the start of the book building process. The cross-sectional regression analysis, using both censored and uncensored data, shows that the initial returns are mainly influenced by investor sentiment and uncertainty about the potential demand concerning the forthcoming IPO, and less by ex-ante uncertainty about the underlying firm's value.