Quid pro quo? What factors influence IPO allocations to investors?

Using detailed information from a large sample of investment banks we test the determinants of IPO allocations. This research draws on data gathered by the UK Financial Conduct Authority, and covers 220 IPOs managed from the UK raising around $160bn. Detailed information on book-building is combined with data on revenues generated (from trading and other activities) by investment banks’ buy-side clients, and data on post-IPO trading. We find evidence that informative bids are rewarded. However, we also find strong evidence that most, but not all, of the major investment banks favor the buyside clients that produce the most revenue

Quid pro quo? What factors influence IPO allocations to investors?

Using detailed information from a large sample of investment banks we test the determinants of IPO allocations. This research draws on data gathered by the UK Financial Conduct Authority, and covers 220 IPOs managed from the UK raising around $160bn. Detailed information on book-building is combined with data on revenues generated (from trading and other activities) by investment banks’ buy-side clients, and data on post-IPO trading. We find evidence that informative bids are rewarded. However, we also find strong evidence that most, but not all, of the major investment banks favor the buyside clients that produce the most revenue

Swing pricing and fragility in open-end mutual funds

How can fragility be averted in open-end mutual funds? In recent years, markets have observed an innovation that changed the way open-end funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on funds’ trading costs to transacting shareholders. Using unique data on investor-level transactions in U.K. corporate bond funds, we show that swing pricing eliminates the first-mover advantage arising from the traditional pricing rule and significantly reduces outflows during market stress. Swing pricing also reduces concavity in the flow-performance relationship and dilution in fund performance