Presenter: Matthias Lassak, AU

Title: Clustered IPOs as a Commitment Device

Abstract: This paper provides an agency-based rationale for the observed clustering of IPOs and tests its implications for underpricing levels. In the model, investment banks are willing to coordinate the timing of their IPO marketing activity as it generates a mutual disciplining effect among underwriters. As a consequence, underwriters use more stringent IPO-screening standards, leading to lower levels of underpricing which elevates their expected fee income while protecting their reputation. We test and find robust evidence of the prediction that underpricing levels should vary in an IPO cluster’s underwriter syndicate composition. In particular, we document lower levels of underpricing in IPO clusters that are underwritten by a larger fraction of unique rival investment banks – a direct consequence of the model’s  suggested disciplining effect.

Presenter: Gyuri Venter, AU

Title: Exchange-Traded Liquidity

Abstract: We show that depth in E-mini equity index futures, the largest futures market, is highly time-varying and has seen an 80% reduction in recent years. Decomposing depth into the number of “dealers” offering quotes and the quote sizes they supply, we trace the reduction back to a decline in the number of active dealers. Studying this channel, we propose a model of liquidity provision where dealers are subject to participation costs and capital constraints. In line with model predictions, we show empirically that fewer active dealers implies higher absolute returns, larger price reversals, and higher volatility. Additionally, we show that dealer numbers provide information about market conditions not contained in commonly used liquidity measures.

Organizers: Stefan Hirth and Anders Merrild Posselt