Validity of Winner’s Curse Hypothesis: Evidence from Indian Stock Market IPOs during 2018-19

The winner’s curse is a tendency for the winning bid in an auction to exceed the intrinsic value or true worth of an item. Because of incomplete information, emotions or any other number of factors regarding the being auctioned, bidders can have a difficult time determining the item’s intrinsic value. As a result, the largest overestimation of an item’s valued ends up winning the auction. Accordingly, the winner will be "cursed" in one of two ways: either the winning bid will exceed the value of the auctioned asset making the winner worse off in absolute terms, or the value of the asset will be less than the bidder anticipated, so the bidder may garner a net gain but will be worse off than anticipated. This paper examines the validity of Winners’ Curse Hypothesis in Indian IPOs during 2018-19. 10 out 11 IPOs during the period of which data are available are analysed in this aspect and it could be found that Winners’ Curse do exist in the Indian IPOs.