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 investing. Books From Today’s Episode: Range: Why Generalists Triumph in a Specialized World — https://amzn.to/36hnU39 Links From Today’s Episode: Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on YouTube — https://www.youtube.com/c/RATIONALREMINDER/featured The University of Chicago Financial Education Initiative — https://financialeducation.uchicago.edu/ ‘Index Fund Trillions Are Distorting Prices in the S&P 500’ — https://www.bloomberg.com/news/articles/2021-01-13/trillions-of-dollars-in-index-funds-are-distorting-the-s-p-500 Lubos Pastor Episode — https://rationalreminder.ca/podcast/124 Hot Issues Market - https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.1975.tb01019.x ‘Quid Pro Quo: What Factors Influence IPO Allocations to Investors’ — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12703 ‘The Long-Term Performance of IPOs, Revisited’ — https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2929733 ‘Initial Public Offerings as Lotteries: Skewness Preference and First-Day Returns’ — https://pubsonline.informs.org/doi/abs/10.1287/mnsc.1110.1431?journalCode=mnsc ‘Rational IPO Waves’ — https://www.jstor.org/stable/3694852 ‘High income improves evaluation of life but not emotional well-being’ — https://www.pnas.org/content/107/38/16489 ‘What do Self-Reports of Wellbeing Say about Life-Cycle Theory and Policy?’ — https://www.nber.org/papers/w24369 ‘Neighbors as Negatives: Relative Earnings and Well-Being’ — https://www.nber.org/papers/w10667 ‘Inequality at Work: The Effect of Pure Salaries on Job Satisfaction’ — https://www.nber.org/papers/w10667 ‘Scarring or Scaring? The Psychological Impact of Past Unemployment and Future Unemployment Risk’ — https://www.jstor.org/stable/41236648 The Loonie Doctor Episode — https://rationalreminder.ca/podcast/73