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Underpricing of Newly Issued Bonds: Evidence from the Swiss Capital Market
Author(s) -
WASSERFALLEN WALTER,
WYDLER DANIEL
Publication year - 1988
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1988.tb03963.x
Subject(s) - bond , monetary economics , capital market , business , stock exchange , bond market index , bond market , financial economics , stock (firearms) , financial system , economics , finance , mechanical engineering , engineering
The pricing of newly issued bonds on the Swiss capital market is investigated over the years 1980–1982. The results reveal a slight underpricing of new bonds at the issue date that is roughly equal to the difference in transactions costs between the markets for new and seasoned bonds. Underpricing is no longer observed when the new bonds start to be traded on the stock exchange, that is, after about two days. Tests of several hypotheses show that unexpected changes in interest rates over the offering period explain part of the underpricing.