ABSTRACT
The central theme of this thesis has been the examination of the efficiency of new issue markets. The thesis examines efficiency from two perspectives:
Efficiency conditions implied by the adverse selection model: strong evidence is provided that uninformed investors and investment banks do not realise excess returns from new issue markets. The test is conducted using the Offer for Sale new issue market because of the regulations governing distribution and the availability of information on the demand for each issue.
Distribution and the efficiency of new issue markets: this thesis develops and tests the first economic explanation of the role of distribution in determining the efficiency of new issue markets. It presents strong evidence that investment banks use the ability to ration shares in a preferential manner to reduce the expected costs of under pricing to the issuing company.
