Bidding and information: Evidence from gilt-edged auctions

Many studies have shown that government debt auctions underprice debt compa red with the secondary market. This paper corroborates this for certain for ms of gilt auction by comparing the price received at auction with an almos t identical parent stock in the secondary market. Although the sample is sm all, the parent/auction stock price comparison gives a cleaner measure than used in other studies. The paper also compares non-fungible auctions (wher e the auction stock differs slightly from the parent at auction and merges subsequently) with fully-fungible ones (where they are identical throughout ). Significant underpricing only occurs in non-fungible auctions.