An empirical investigation of the speed of information aggregation: a study of IPOs

This paper researches the microstructure of the price process after the IPO, to gain insight into the information aggregation process of secondary market trading. We investigate a sample of 2,040 US IPOs between 1993 and 2000 and find that it takes approximately one week for all IPO-related information to be reflected in the market price. Using a novel methodology to gauge event-time volatility, we attribute this fast information aggregation to the bookbuilding process and to the extraordinary liquidity in the IPO aftermarket.