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Underpriced IPOs

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

Minimum 200 words please.

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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 ...

Solution Summary

Explains some reasons for IPO's being underpriced.