Consider the following experiment: you submit a purchase order for every firm commitment initial public offering of oil and gas exploration companies. There are 22 of these offerings, and you submit a purchase order for approximately €1,000 in equity for each of the companies. However, for ten issues you are allocated no shares and for five issues you receive fewer than the requested number of shares. In only seven issues do you receive the number of shares you requested.

Assume that this was a very good year for oil and gas exploration company owners: on average, for the 22 companies that went public, the shares were selling for 80 per cent above the offering price a month after the initial offering date. However, you have looked at your own performance record and found that the €8,400 invested in the 12 companies had grown to €10,000, representing a return of only about 20 per cent (commissions were negligible). Did you have bad luck, or should you have expected to do worse than the average initial public offering investor? Explain.