Public information and IPO underpricing

We analyze the effect of public information on rational investors' incentives to reveal private information during the bookbuilding process and their demand for allocations in the IPO. Our model generates several new predictions. First, investors require more underpricing to truthfully reveal positive private information in bear markets than in bull markets (the incentive effect). Second, the fraction of positive private signals and of underpriced IPOs is increasing in market returns (the demand effect). Combined, these two effects can explain why IPO underpricing is positively related to pre-issue market returns, consistent with extant evidence. Using a sample of 5,000 U.S. IPOs from 1981-2008, we show that the empirical implications of the model are borne out in the data.Public information; partial adjustment; underpricing; IPOs; bookbuilding

Economic valuation of drinking water quantity and quality: A literature review

This literature review is a part of the research project Risk-based prioritization of water protection in sustainable spatial planning (WaterPlan), funded by the Swedish research council Formas. The aim of the project is to enable well-informed analyses and prioritization of measures for protecting water sources as a part of future urban development. One key to prioritization is knowledge about the economic values of drinking water quality and quantity. The purpose of the literature review is therefore to map earlier studies of such values, and to use this mapping for (a) evaluating the opportunities to transfer results from earlier studies to a Swedish setting, and (b) learning from earlier experience how potential new primary valuation studies in a Swedish setting could be designed.The literature review allowed some main valuation situations among the studies to be identified. Based on these different situations, the following rough categorization of studies was performed: i. Improvements in water quality/quantity (10 studies)ii. Preservation of water quality/avoiding water quality deterioration (5 studies)iii. Avoiding quantity restrictions/ensuring stable supply (6 studies)iv. WTP to reduce risks to drinking water sources (5 studies)v. Meta and benefit transfer studies (8 studies)vi. National valuation studies (6 studies)The report includes a listing of all identified studies according to this categorization.The results from the literature review indicate that there is a lack of suitable value estimates to allow for benefit transfer to Swedish conditions to evaluate the drinking water service in relevant policy scenarios. It is therefore concluded that new valuation studies might be needed for fulfilling the objectives of the WaterPlan project.One possible approach for carrying out new valuation studies is to follow the demand function approach. This approach is therefore reviewed, but it is found that the approach entails some important weaknesses for the case of Sweden. One important reason is that there is not an actual well-functioning market for drinking water in Sweden. The report therefore also reviews the use of stated preference studies for valuing drinking water quantity and quality. This review indicates experiences that can be helpful in the development of new valuation studies in Sweden which follow the stated preference approach

Partial Adjustment to Public Information in the Pricing of IPOs

Extant literature shows that IPO first-day returns are correlated with market returns preceding the issue. We propose a rational explanation for this puzzling predictability by adding a public signal to Benveniste and Spindt (1989)’s information-based framework. A novel result of our model is that the compensation required by investors to truthfully reveal their information decreases with the public signal. This “incentive effect” receives strong empirical support in a sample of 6300 IPOs in 1983–2012. Controlling for the incentive effect, the positive relation between initial returns and pre-issue market returns disappears for top-tier underwriters, where the order book is held to be most informative, effectively resolving the predictability puzzle

Computational animal welfare: Towards cognitive architecture models of animal sentience, emotion and wellbeing

To understand animal wellbeing, we need to consider subjective phenomena and sentience. This is challenging, since these properties are private and cannot be observed directly. Certain motivations, emotions and related internal states can be inferred in animals through experiments that involve choice, learning, generalization and decision-making. Yet, even though there is significant progress in elucidating the neurobiology of human consciousness, animal consciousness is still a mystery. We propose that computational animal welfare science emerges at the intersection of animal behaviour, welfare and computational cognition. By using ideas from cognitive science, we develop a functional and generic definition of subjective phenomena as any process or state of the organism that exists from the first-person perspective and cannot be isolated from the animal subject. We then outline a general cognitive architecture to model simple forms of subjective processes and sentience. This includes evolutionary adaptation which contains top-down attention modulation, predictive processing and subjective simulation by re-entrant (recursive) computations. Thereafter, we show how this approach uses major characteristics of the subjective experience: elementary self-awareness, global workspace and qualia with unity and continuity. This provides a formal framework for process-based modelling of animal needs, subjective states, sentience and wellbeing.publishedVersio

Risk assessment of marking and tracing methods with regards to the welfare of farmed salmonids. Opinion of the Panel on Animal Health and Welfare of the Norwegian Scientific Committee for Food Safety

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