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Comparing the efficiency of pricing mechanisms in Norwegian ipos

Myklevold, Christoffer; Kise, Haakon
Master thesis
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IPO-data.xlsx (2.345Mb)
Regression output 2.xlsx (8.207Mb)
Regression output.xlsx (8.636Mb)
URI
http://hdl.handle.net/11250/2477137
Date
2017
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  • Master of Science [1823]
Abstract
On Oslo Stock Exchange, there are mainly two pricing mechanisms that are being

used when pricing an IPO, these being book-building and fixed-price. As there do

not exist much research on which of these two are the more superior pricing

mechanism when pricing a Norwegian IPO, we want to test empirically which of

these two are the more efficient pricing mechanism regarding the level and variance

of underpricing. In our research, we have gathered data from 125 IPOs from

February 2000 until June 2017, where we have limited ourselves to only include

data from Oslo Stock Exchange (excluding Axess and Merkur). We used a paired

t-test to identify a 1 percent significant level of underpricing of 4,29 and 3,9 percent

of book-building and fixed-price IPOs, respectively. We also compared the two

pricing mechanisms by using Mood’s Median Test, Levene’s Test of difference in

variance and several multivariate regression models. We also compared crosssectional

differences within the subsamples with respect to different firm-, issueand

market characteristics. This research have us concluding that book-building do

dominate fixed price regarding pricing efficiency, where we found that it produces

lower conditional variance (variance after controlling for firm-, issue-, and market

effects) and are better at incorporating market conditions prior to the IPO.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2017
Publisher
BI Norwegian Business School

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