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Retail Investor Attention and IPO Valuation
Author(s) -
Colaco Hugh M. J.,
De Cesari Amedeo,
Hegde Shantaram P.
Publication year - 2017
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12113
Subject(s) - initial public offering , underwriting , valuation (finance) , business , proxy (statistics) , ask price , monetary economics , finance , economics , machine learning , computer science
Given restrictions placed on communication with prospective investors, retail investor attention can help firms/underwriters with the task of initially valuing an IPO. Using Google search volume to proxy for retail investor attention, we find that the presence of and an increase in retail attention following initial filing but prior to initial pricing are positively related to initial valuations. Our results are robust to alternative matching methods to identify our matched sample of non‐IPO firms and to including several controls for institutional demand. We conclude that retail investor attention plays a critical role in the early stages of IPO valuation.