Enter formulas to calculate the requirements of this problem.
Problem 1: What is the average underpricing of this sample of IPOs?
Average underpricing FORMULA
Problem 2: What is the average initial return on my "portfolio" of shares purchased from the four IPOs I bid on?
Calculate the average initial return weighting by the amount of money invested in each issue.
Investment Initial
(Shares x price) Return Profit
A FORMULA 7% FORMULA
B FORMULA 12% FORMULA
C FORMULA -2% FORMULA
Total $0 $0
Average return FORMULA
Problem 3: Why have I performed so poorly relative to the average initial return on the full sample of IPOs? What lessons do you draw from my experience?