Emmanuel Morales Camargo, Ph.D. Assistant Professor Finance Department

Telephone: (505) 277-3403
Email: emmanuel@unm.edu

• “Restrictions on Allocation Discretion: Evidence from Clawbacks in Hong Kong IPOs”

  Abstract: This study tests the implications of some of the leading IPO underpricing models, using over five years of bid and allocation data on a Hong Kong sample of bookbuilt offerings, subject to clawback restrictions. I find that these allocation restrictions significantly modify the nature of the bookbuilding mechanism, reducing the amount of information underwriters are able to extract from road show participants. However, far from inducing a complete breakdown of the IPO price discovery process, I find that clawbacks enhance it. My tests show that when institutional investors have alternative ways to convey valuable pricing information to underwriters, the information gains from those alternative channels can more than offset the loss of road show information. Moreover, this can be done at no incremental cost in terms of underpricing, since the institutional investors who chose the alternative channels of can settle for larger allocations of shares with the standard underpricing levels.

• “Underpricing and Aftermarket Liquidity: An Empirical Exploration of Hong Kong IPOs”

  Abstract: This study evaluates the implications of three of the extant IPO models relating underpricing and aftermarket liquidity. Using hand collected data from a sample of bookbuilt Hong Kong IPOs, this study tests the predictions of the aforementioned models by evaluating not only the direction and sign of the theorized relation between underpricing and aftermarket liquidity, but also the role played by the shareholder base and information environment factors suspected of shaping this relation. The public availability of bid and allocation data in the Hong Kong Stock Exchange has made it possible to conduct such an in-depth evaluation of these models, an undertaking not yet attempted by prior empirical research. Test results show little support for models that posit that aftermarket liquidity and liquidity risk are responsible for higher underpricing.  In contrast, I find strong support for models that conceive observed underpricing as a significant driver of post-IPO liquidity.

• “Uncertainty and Differential Information in Common-Value, Divisible-Good Auctions” Joint work with Orly Sade (Hebrew University), Charles R. Schnitzlein (University of Central Florida), and Jaime F. Zender (University of Colorado).
  Abstract: An experimental approach is used to examine the performance of two different multi-unit auction designs: discriminatory and uniform-price with fixed supply.  In the experimental setting, each bidder receives an i.i.d. signal which plays a role in determining fundamental value, but no bidder has an ex ante informational advantage.  We thus study a setting in which the winner’s curse typically arises in a single-unit auction experiments, but focus on how the ability to submit demand curves affects performance, and importantly, how this dependence is mechanism specific.  Although phenomena like the winner’s curse are well suited for a laboratory study, we also place our work in the context of theoretical models (i.e. Wang and Zender (2002)).  Our work is in part motivated by the increasing interest in using auction mechanisms in financial settings such as equity IPOs where there can be substantial disagreement with respect to intrinsic value and the auction mechanism can play a potentially important role in information aggregation

• The University of New Mexico
• The Robert O. Anderson School of Management and Graduate School
• Take Charge America Institute for Consumer Financial Education and Research