Why are IPOs Always Underpriced? An Empirical Study of Behavioral Economics

IPO underpricing has become one of the most famous market anomalies in the modern financial market. This phenomenon, called the "New Issue Puzzle," stimulated a hot debate among economists. Many of them focused on explaining the cause of this anomaly using the classical economics models. It is relatively novel to explain this anomaly based on behavioral economics theories. This paper took a comprehensive perspective, considered two possible stages that the underpricing derived from: the pricing...
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