Empirical evidence suggests that new equity issues are generally:

Question

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Empirical evidence suggests that new equity issues are often underpriced, in part, to counteract the winner's curse. The winner's curse refers to the tendency of the highest bidder in an auction to overpay, and in the case of new equity issues, it can result in overpricing the stock. To avoid this, underpricing the stock can attract more investors and ensure a more efficient market.

Empirical Evidence Suggests That New Equity Issues Are Generally