The research effort aimed at explaining the short run anomaly of the IPO market has provided numerous analytical advances and empirical insights, and a large list of explanations has been offered.
Ibbotson (1975) is the first who offered a list of possible explanations for underpricing, many of which were formally explored by other authors in later work.
The list of explanations that were advanced to clarify and to understand the underpricing anomaly and to resolve this short run puzzle of the IPO market is long. The considerable research effort in the field of Initial Public Offerings market has resulted in many explanations and the list can not be exhaustive. In this paragraph, I summarize the most important researches and findings and I classify the different theories and explanations advanced in two main categories:
– Explanations related to the asymmetric information theory that have been popular among academics and have been considered the most convincing explanations for decades by a great number of researchers, and
– Explanations asserting the symmetric information.