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Underpriced IPOs

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One of the characteristics of IPOs that puzzles experts is that they tend to be underpriced. What are the explanations for IPOs being underpriced?

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Solution Summary

Explains some reasons for IPO's being underpriced.

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Although underpricing takes place all over the country, people still try to figure out the reasons for it. When explaining underpricing of IPOs, explanations fall under four categories: Information asymmetry, institutional reasons, control considerations, and behavioral approaches. The information asymmetry model classifies investors as either informed or uninformed. Informed ...

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