Jan 28, 2021
Skewed Factor IPO Investing and Financial
Episode 134: Show Notes.
Many IPOs start with a bang, resulting in high first-day closing
prices that attract retail investors. Today we unpack new and
established research to explore how the hottest IPOs compare with
average market returns. We open our conversation by first sharing
community updates and details about the book and news of the week.
After reflecting on how 2020 was one of the biggest IPO years since
2000, we talk about why IPOs tend to release in waves. We then chat
about where IPO allocation usually goes and why most investors
aren’t given access to huge early returns. A key insight this
episode, we dive into how retail investors impact IPO pricing and
why IPO buy and hold returns often trail the market. Following
this, we discuss the factors that skew IPO prices, why IPOs
resemble lotteries, and whether there is an optimal model for when
companies make an IPO. From IPOs we jump into our planning topic on
well-being and behavioural coaching. We start by looking into the
differences between financial well-being and funded contentment.
Linked to this, we talk about other forms of capital that range
from human and social capital to temporal capital. We examine the
factors that impact your well-being before touching on why you
should make decisions while considering all your forms of capital.
Later, we debut a new feature and then offer our bad advice of the
week. Tune in for another informative conversation on rational
Key Points From This Episode:
- From building battlebots to what they’ve been watching, hosts
Benjamin and Cameron catch-up with listeners.
- Rational Reminder community updates and added features.
- Being a generalist over a specialist? Hear about the book of
the week. [0:06:23]
- Hear our news roundup for the week.
- Introducing today’s portfolio topic: investing in IPOs.
- Exploring IPO waves, pricing, and why only high-value investors
are given IPO offerings. [0:19:54]
- How institutions and retail investors impact IPO pricing.
- Examining the historical buy and hold returns for IPO stocks.
- Why IPO stocks might be the “worst of all worlds.”
- Research that shows why IPOs are like lotteries.
- How ‘skewness factors’ hype up the value of IPOs.
- Why waves of companies tend to make IPOs near the same time.
- Benjamin summarizes his arguments for and against IPOs.
- Introducing today’s planning topic: your well-being.
- Financial well-being versus funded contentment and the
different forms of capital. [0:47:11]
- The importance of weighing your other forms of capital when
making decisions. [0:51:12]
- Why high-income doesn’t correlate with higher well-being.
- How nationality and social factors affect self-reported
- Consequences from people being generally bad at predicting what
will make us happy. [01:00:37]
- Setting financial goals that consider your well-being and sense
of purpose. [01:02:58]
- How unemployment can affect your well-being.
- Why you should consider other forms of capital when saving for
- We answer a conversation card from the University of Chicago
Financial Education Initiative. [01:09:30]
- Hear our bad advice of the week, courtesy of TikTok.