Journal article
Searching for Google's Value: Using Prediction Markets to Forecast Market Capitalization Prior to an Initial Public Offering
Management science, Vol.55(3), pp.348-361
03/01/2009
DOI: 10.1287/mnsc.1080.0956
Abstract
We conducted prediction markets designed to forecast post-initial public offering (IPO) valuations before a particularly unique IPO: Google. The prediction markets forecast Google's post-IPO market capitalization relatively accurately. While Google's auction-based IPO price was 15.3% below the first-day closing market capitalization, the final prediction market forecast was only 4.0% above it. The forecast also accorded with the level of over-subscription in the IPO auction. Evidence available to both outsiders (from the prediction market forecasts) and insiders (through the orders in Google's auction) predicted similar degrees of underpricing. We argue that, with repetition, such markets could provide useful information for understanding the IPO process.
Details
- Title: Subtitle
- Searching for Google's Value: Using Prediction Markets to Forecast Market Capitalization Prior to an Initial Public Offering
- Creators
- Joyce E. Berg - University of IowaGeorge R. Neumann - University of IowaThomas A. Rietz - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Management science, Vol.55(3), pp.348-361
- Publisher
- Informs
- DOI
- 10.1287/mnsc.1080.0956
- ISSN
- 0025-1909
- eISSN
- 1526-5501
- Number of pages
- 14
- Grant note
- Iowa Electronic Markets
- Language
- English
- Date published
- 03/01/2009
- Academic Unit
- Finance; Accounting
- Record Identifier
- 9984380458902771
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