In 2010 you bought 12 initial public offerings (IPOs) of common equity of which there were 22 in total. You held each of these for approximately one month and then sold them. The 22 IPOs were all for oil- and gas-exploration companies. You submitted a purchase order for approximately $1000 of equity for each one. With 10 of these, no shares were allocated to you. With five of the 12 offerings that were purchased, fewer than the requested number of shares were allocated.

The year 2010 was very good for oil- and gas-exploration companies. For the 22 IPOs the shares were selling on average for 80 percent above the offering price within a month. Yet, you looked at your performance record and found the $8,400 invested in 12 companies had grown to only $10,100, a return of only about 20 percent. (Commissions were negligible). Did you have bad luck or should you have expected to do worse than the average IPO investor? Explain.