
The initial underpricing of IPOs appears in fact substantial. Welch and Ritter (2002)
and Loughran and Ritter (2004), for example, distinguish the 1980s, the 1990 to
mid-1990 period, the mid-1990 to 1998 period, the Internet bubble years 1999 to
2000, and the years thereafter. For the US, average initial first-day returns are docu-
mented as follows: 7.4% for 1980 to 1989, 11.2% for 1990 to 1994, 18.1% for
1995 to 1998, 65.0% for 1999 to 2000, and 14.0% for 2001. Loughran and Ritter
(2004) attribute this time-variation in part to the characteristics of the companies
going public. Ljungqvist and Wilhelm (2002) found similar effects, particularly for ...