Towards a rational bidding process of initial public offerings: a proposed model for secure auction based on homomorphic computation and secure hash functions

Abstract

There has been a large pool of research on the factors of initial public offerings (IPO) underpricing and investors' herd behaviour that influence investment decisions in general but no attention has been paid on the security aspects of IPO bidding and allocation processes to avoid unfair and fraudulent trading activities. This paper proposes a cryptographic model for secure auction of initial public offerings in Indian context. The paper synthesises IPOs by identifying the vulnerable points in it and proposes a homomorphic computation-based cryptographic model to secure it. The model uses a cryptographic hash function-based data hiding protocol for its auction process. The total infrastructure setup has also been discussed and the security measures are analysed.