IPO under-pricing and its variation by world regions: kernel density findings and inferential results

In this paper, we investigate under-pricing of the first sale of stock by a private firm to the public (the initial public offering, IPO) [Ritter (2011)], by examining the extent of its variation among the principal regions or continents of the world (e.g., Asia, Africa, Europe). To better understand this phenomenon, we use univariate, non-parametric kernel density estimates [Van Kerm (2012)], as an exploratory tool [Salgado-Ugarte et al. (1993); Fox (1990)], and demonstrate how it provides a useful “visualization” of data [Cox (2005)]. These estimates enabled us to identify by eye what proved to be (as adduced by further explicitly inferential tests) significant cross-country/regional/continental differences in IPO under-pricing. In particular, the European and Asian IPO under-pricing data were found to display statistically significantly different distributional characteristics, with the former distribution being relatively highly peaked, with a thin upper tail, and the latter being lesser peaked, with a fat upper tail.