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Institutional allocation in initial public offerings: Empirical evidence

Publication ,  Journal Article
Aggarwal, R; Prabhala, NR; Puri, M
Published in: Journal of Finance
January 1, 2002

We analyze institutional allocation in initial public offerings (IPOs) using a new data set of U.S. offerings between 1997 and 1998. We document a positive relationship between institutional allocation and day one IPO returns. This is partly explained by the practice of giving institutions more shares in IPOs with strong premarket demand, consistent with book-building theories. However, institutional allocation also contains private information about first-day IPO returns not reflected in premarket demand and other public information. Our evidence supports book-building theories of IPO underpricing, but suggests that institutional allocation in underpriced issues is in excess of that explained by book-building alone.

Duke Scholars

Published In

Journal of Finance

DOI

ISSN

0022-1082

Publication Date

January 1, 2002

Volume

57

Issue

3

Start / End Page

1421 / 1442

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment
 

Citation

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Aggarwal, R., Prabhala, N. R., & Puri, M. (2002). Institutional allocation in initial public offerings: Empirical evidence. Journal of Finance, 57(3), 1421–1442. https://doi.org/10.1111/1540-6261.00465
Aggarwal, R., N. R. Prabhala, and M. Puri. “Institutional allocation in initial public offerings: Empirical evidence.” Journal of Finance 57, no. 3 (January 1, 2002): 1421–42. https://doi.org/10.1111/1540-6261.00465.
Aggarwal R, Prabhala NR, Puri M. Institutional allocation in initial public offerings: Empirical evidence. Journal of Finance. 2002 Jan 1;57(3):1421–42.
Aggarwal, R., et al. “Institutional allocation in initial public offerings: Empirical evidence.” Journal of Finance, vol. 57, no. 3, Jan. 2002, pp. 1421–42. Scopus, doi:10.1111/1540-6261.00465.
Aggarwal R, Prabhala NR, Puri M. Institutional allocation in initial public offerings: Empirical evidence. Journal of Finance. 2002 Jan 1;57(3):1421–1442.
Journal cover image

Published In

Journal of Finance

DOI

ISSN

0022-1082

Publication Date

January 1, 2002

Volume

57

Issue

3

Start / End Page

1421 / 1442

Related Subject Headings

  • Finance
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1502 Banking, Finance and Investment