AG991 International Financial Markets and Banking

Workshop 4
Workshop Questions:

Why are IPOs “underpriced”?

Why are secondary markets important for the economy?

Compare order-driven and quote-driven equity markets. What are the advantages and
disadvantages of each?

Questions for self-study1: What are the steps in going public in the UK?

What role do investment banks play in an IPO?

Background reading (optional): HB ch 6 / A ch 8 &9 /VM ch 8

Required reading *:

Ibbotson, R.G., and Ritter, J.R. (1995) ‘Initial Public Offerings’, in Jarrow, R.,
Maksimovic, V. and Ziemba, W. (eds.) Handbooks of Operations Research and
Management Science: Finance, Amsterdam: North-Holland, pp. 993-1016. Available
with Strathclyde credentials at:
https://www.sciencedirect.com/science/article/pii/S092705070580074X

Stoll, H.R. (2006) ’Electronic Trading in Stock Markets’, Journal of Economic

Perspectives 20(1), pp. 153–174. Available at:
http://pubs.aeaweb.org/doi/pdfplus/10.1257/089533006776526067

Stewart, H. and Goodley, S. (2011) ‘Big Bang's shockwaves left us with today's big
bust’. The Guardian [online], 9 October. Available at:
http://www.guardian.co.uk/business/2011/oct/09/big-bang-1986-city-deregulation-
boom-bust

*links to these are also on myplace

Optional sources of further information:

Dodd, R. (2018) ‘Markets: Exchange or Over-the-Counter’, Finance & Development [online], 31 May.
Available at: https://www.imf.org/external/pubs/ft/fandd/basics/markets.htm

Madhavan, A. (1992) ’Trading Mechanisms in Securities Markets’, Journal of Finance 47(2), 607-641.

Ritter, J. R. and Welch, I. (2002) ‘A Review of IPO Activity, Pricing, and Allocations’, Journal of Finance
57(4), pp. 1795-1828. Available at: https://site.warrington.ufl.edu/ritter/files/2016/01/A-Review-of-

1
Guidance on a solution approach will be posted on myplace at a later date.

© Juliane Thamm – University of Strathclyde

IPO-Activity-Pricing-and-Allocations-2002-08.pdf (Note: Ritter’s web-page contains further
information and research on IPOs: https://site.warrington.ufl.edu/ritter/published-articles/ )

Shiller, R. (2008) Investment Banking and Secondary Markets. Available at:

http://youtu.be/OyE3AIiv9l0

© Juliane Thamm – University of Strathclyde