Insights into High Frequency Trading from the Virtu Initial Public Offering

Long run underperformance of initial public offerings: an explanation;

Initial public offerings, even though risky, typically underperform the indices for the first few years after offering. This can be explained by high divergence of opinion raising the initial market price, and by this divergence of opinion declining over time. With time, the valuation of the price setting marginal investor comes closer to the average investor’s valuation. This theory also expla...

A truthful Screening Mechanism for Improving Information Asymmetry in Initial Public Offering Transactions

Allocation of initial public offerings and flipping activity $ Reena Aggarwal

There is a general perception that the large trading volume in initial public offerings is mostly due to ‘‘flippers’’ that are allocated shares in the offering and immediately resell them. On average, however, flipping accounts for only 19% of trading volume and 15% of shares offered during the first two days of trading. Institutions do more flipping than retail customers and hot IPOs are flipp...

Dark Trading at the Midpoint: Pricing Rules, Order Flow and High Frequency Liquidity Provision

We examine the competitive advantage enjoyed by dark venues over stock exchanges due to rules regulating the minimum price variation (MPV) for quoting equity securities. The MPV rule requires quotes above $1.00 per share to be in pennies, but it permits subpenny trades to facilitate price improvement for marketable orders. This exception to the penny quote rule benefits dark venues by allowing ...

The Impact of Audit Quality on Earnings Management: An Experimental Study with Evidence from IPO

According to a method of earnings management activities that administrators can manage reported earnings from the definition of real activity. In particular they can be located across time and activities in a way that accounting period to achieve a certain revenue target. Conservative attitudes of auditors in presenting their views about the independence of the auditor can considered as a remar...