Empirical Study on IPO Underpricing in China Based on Investors Sentiment
IPO is the abbreviation of Initial Public Offerings. It means the companys common stock is issued to the public for the first time and listed and traded in the Stock Exchange. IPO underpricing is the deviation range of the issue price and the first days closing price, and it usually be measured by Initial Return, that is Initial Return (IR) = (the first days closing price - the issue price) / the issue price. The results show that IPO underpricing is a common phenomenon in the global securities market Since the establishment of Chinas securities market, high IPO underpricing phenomenon has always existed, and it even higher than that in the worlds developed countries. From the perspective of the behavior finance, based on investors prior optimistic sentiment, and by comparing the relative efficiency of the primary and the secondary market in China, this paper makes an empirical analysis on the causes of the high IPO underpricing. We find that compared with the secondary market price, the issue price reflects the corporate intrinsic value better, so it is more rational Through an empirical test to a sample of the 222 IPO case in both Shanghai and Shenzhen security exchanges during 2010, we find that the three proxy variables, IR10, Turnover and Lotrate, represent a significant relationship to IPO expected underpricing. This finding provides a strong empirical evidence to the hypothesis that the investors prior optimistic sentiment is related to the IPO expected underpricing. Finally, we make some reasonable suggestions to inhibit the high IPO underpricing.
Initial Public Offerings IPO Underpricing the Investors Prior Optimistic Sentiment
Weiqing Wang Yan Geng
Department of Financial Engineering, The University of Science and Technology Beijing, Beijing, China
国际会议
2011 International Conference on Economic and Information Management(2011年经济与信息管理国际会议 ICEIM 2011)
北京
英文
224-227
2011-09-03（万方平台首次上网日期，不代表论文的发表时间）