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a. What is the average underpricing of this sample of IPOs?
Average underpricing FORMULA
b. What is the average initial return on my "portfolio" of shares purchased from the four IPOs I bid on?
Calculate the average initial return weighting by the amount of money invested in each issue.
Investment Initial
(Shares x price) Return Profit
A FORMULA 7% FORMULA
B FORMULA 12% FORMULA
C FORMULA -2% FORMULA
Total $0 $0
Average return FORMULA
c. Why have I performed so poorly relative to the average initial return on the full sample of IPOs? What lessons do you draw from my experience?
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