Total and Primary Underpricings in the IPO Market : Are They Explained by the Same Variables?

This study contributes to a broadening of the international scope of empirical research on total and primary underpricings in the IPO market, and tries to show that the variables traditionally linked to information asymmetries between firms, underwriters and investors cannot adequately explain the total (offer-to-close) return. This is because, behind the total underpricing, there are variables that explain the primary return, which are associated mainly with information asymmetries, and variables related to the opening prices on the first trading day, which try to measure the behaviour and reaction of investors and underwriters to opening prices. Our results point towards this argument and allow us to show that it is more reasonable to measure underpricing through primary return (with opening prices) than through total return (with closing prices), since closing prices are contaminated by these behaviours and reactions