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Finance & Accounting
Pages 10 (2510 words)
FINANCE: ASSIGNMENT 2 Table of Contents Part A: Case Study – IPO Under-Pricing 4 1. Analysis of Short-run IPO under Pricing Phenomenon in Australian Stock Market 4 2. Performance Analysis after IPO 6 3. Theories Explaining Occurrence of Short-run IPO under Pricing in US or Australian Stock Market 6 Part B: Valuation – Dividend Discount Model 9 1.
Analysis of Short-run IPO under Pricing Phenomenon in Australian Stock Market The phenomenon of under pricing of Initial Public Offer (IPO) is often considered as an anomaly that is mostly visible in the primary markets throughout the world. But the degree or extent of under pricing varies from country to country and further from sector to sector. Under pricing is defined as the phenomenon when the offer price of a new issue is lower than the price of first trade. It is calculated as difference close price on the date of listing and offer price of issue expressed as percentage of offer price of issue. In the US market, the short run under-pricing is a well known phenomenon but in order to investigate whether this phenomenon exists in the Australian stock markets or not the researcher will have to measure the short-run IPO performance by analysing the returns of IPOs that were listed between chosen time frame and remained listed up to at least 2 year holding period (Rhee, 2002, pp.1-7). ...
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