Question: Having heard about IPO under pricing, I put in an order to my broker for 1,000 shares of every IPO he can get for me.

Having heard about IPO under pricing, I put in an order to my broker for 1,000 shares of every IPO he can get for me. After 3 months, my investment record is as follows:

a. What is the average under pricing of this sample of IPOs?
b. What is the average initial return on my "portfolio" of shares purchased from the four IPOs I bid on? Calculate this average initial return, weighting by the amount of money invested in each issue.
c. "You have just encountered the problem of the winners' curse." True or false?

IPO Shares Allocated to Me Price per Share nitial Return 7% 12 -2 23 500 200 1,000 $10 20 12

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