Published in：JOURNAL   OF FINANCIAL MARKETS

Abstract：We study institutional investors' bidding behavior in initial public offering(IPO) auctions. Our findings suggest that institutional investors exhibit cognitive reference point(CRP) anchoring.Thatis,investorsfocusonintegernumbersclosesttonon-integerendpointsof proposed IPO price range as CRPs when making IPO bids. When institutional investors round up(down) the endpoints of the proposed IPO price range to arrive at CRPs, we find: (1) the average bid price is higher(lower), (2)the subsequent IPO offer price is higher(lower), and(3)IPO first day return is lower(higher).

Keywords：Cognitivereferencepoints, Institutional investors, IPO pricing, IPO auction