Problem:
One method utilized by companies to obtain the long-term capital necessary to run and grow their businesses is by providing the general public with the option to purchase stocks. The company's first sale of stock is known as the initial public offering (IPO). When a company first offers the IPO, stocks are, on average, underpriced.
Required to do:
Question 1. Discuss the implications of such underpricing to established theories of market efficiency.
Question 2. Explain the role market efficiency might play in the underpricing theories presented by Loughran and Ritter.
Please click on the Dropbox link for article by Loughran and Ritter:
https://www.dropbox.com/sh/nq6k3hjbzw0q5nj/fVHOA7_X7H
Please include any additional reference.