Why Does Underpricing Exist

Based on the evidence we've examined, an obvious question is, Why does underpricing continue to exist? As we discuss, there are various explanations, but, to date, there is a lack of complete agreement among researchers as to which is correct.

We present some pieces of the underpricing puzzle by stressing two important caveats to our preceding discussion. First, the average figures we have examined tend to

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

VI. Cost of Capital and Long-Term Financial Policy

16. Raising Capital

© The McGraw-Hill Companies, 2002

PART SIX Cost of Capital and Long-Term Financial Policy

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