Ritter's study of Initial Public Offerings (IPOs) showed that the post offering stock 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 stock performance of IPOs was less than the control group by about 2% in the five years following the IPO. This suggests that the market tends to overvalue IPOs at issuance, leading to lower than expected returns for investors in the weeks and months following the offering.

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