Using the adverse selection component of the spread as a measure of asymmetric information, we investigate how asymmetric information evolves after firms go public. We find that the level of asymmetric information is lower immediately after the initial public offering (IPO) compared with its...

Prior studies offer various empirical models to decompose the observed bid-ask spread into the adverse-selection and transitory (order-processing and inventory-holding) components. There is limited evidence, however, on whether the spread components estimated from these models indeed measure...