Several studies have documented significant average underpricing for initial public offerings (IPOs) of common stock on the NASDAQ system - that is, the closing price on the first day of trading is significantly higher on average than the offer price. In our paper, we examine whether IPOs on the...

In this paper, we examine the behavior of the bid-ask spreads of initial public offerings of common stocks (IPOs) in the over-the-counter market. We find that, in the initial aftermarket, the quoted percentage bid-ask spreads for IPOs are, on average, about threefourths as large as those for...