Primary market characteristics and secondary market frictions of stocks

Boehme, Rodney and Colak, Gönül (2012) Primary market characteristics and secondary market frictions of stocks. Journal of Financial Markets, 15 (2). pp. 286-327. ISSN 1386-4181

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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.

Item Type: Article
Schools and Departments: University of Sussex Business School > Accounting and Finance
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 22 Feb 2022 11:03
Last Modified: 22 Feb 2022 11:15

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