Ritter's study of Initial Public Offerings (IPOs) showed that the post offering share performance was:
A)less than the control group by about 2% in the ﬁve years following the IPO.
B)incorrectly priced at issuance because over the next ﬁve years the abnormal returns were
Greater than zero on average.
C)immaterial to the pricing of the IPO because future market performance is unknown at
Issuance.
D)equal across IPOs, irrespective of risk or which year they were issued.
E)All of the above.

Question

Quizplus · Accepted Answer

Ritter's study found that the post-offering share performance of IPOs was less than the control group by about 2% in the five years following the IPO. This suggests that IPOs are typically overpriced at issuance and subsequently underperform in the market. The other options are either incorrect or irrelevant to the findings of Ritter's study.

Ritter's Study of Initial Public Offerings (IPOs) Showed That the Post