We explain why underpricing in IPOs can be large in magnitude and clustered, using a signalling model where firms have private information about their qualities (high or low). A novel feature is that a firm, if perceived by the market as high quality, benefits from the industry's publicity which...

We study a large market with directed search and signaling. Each seller chooses an investment that determines the quality of the good which is the seller's private information. A seller also chooses the price of the good and the number of selling sites. After observing sellers' choices of prices...

In this paper we analyze the clustering phenomenon of underpricing in initial public offerings (IPOs), where firms in a particular industry choose to issue their new shares at the same time and at great discounts. The industry consists of many firms that have private in-formation about their own...