why new issues are underpriced外文原文.pdf

Journal of Financial Economics 15 (1986) 187-212. North-Holland WHY NEW ISSUES ARE UNDERPRICED* Kevin ROCK Hurvord Bwness School, Boston, MA 02163, USA Received November 1984, final version received August 1985 This paper presents a model for the underpricing of initial public offerings. The argument depends upon the existence of a group of investors whose information is superior to that of the firm as well as that of all other investors. If the new shares are priced at their expected value, these privileged investors crowd out the others when good issues are offered and they withdraw from the market when bad issues are offered. The offering firm must price the shares at a discount in order to guarantee that the uninformed investors purchase the issue. 1. Introduction Several years ago, Grossman (1976) showed that if one class of investors has superior information about the terminal value of an asset, the information can be read by anyone from the equilibrium price. This result produces a paradox. If anyone can infer private information from the equilibrium price, no one pays to collect information. Yet if no one collects information, the price reveals none, and an incentive emerges to acquire it. The key to the paradox is the assumption of a noiseless environment. If noise is present in the equilibrium price, privileged information is secure.