The Statistic Research On The Underpricing In IPO Under The Verification System

IPO underpricng is referred to an average excess return, statistically significantly positive, of a new issue immediately aftermarket relative to its offering price. A common perception is that underpricing is a challenge to market efficiency at least apparently. Since noted as an puzzle by Ibboston(1975), underpricing have been one of the most attractive topics in financial economics research. However, the last conclusion is not formed though a number of theories have been put forth,Underpricing in Chinese market is extremely high all along from the beginning of securities exchanges, compared with other markets in both developed and developing countries. Very high underpricing makes it possible for subscribers to gain sudden high profits. It is blamed that underpricng in China, attracting a large sum of fund into IPO market, is too high for a healthy stock market.In the past people believed that underpricing is the outcome of the regulation of offering price by CSRC. But the fact is, though the regulation was loosed gradually after the rule of verification system was revealed, the degree of underpicing maintained over 100% instead of droping obviously. Why the underpricing is still so high under verification system? It's a question.This research is to answer the question by statistic analysis, with 193 new issues from Jan. 2000 to Aug. 2001. The article is divided into 8 parts. The introduction, as the first part, pictures the current and historical status of underpricing in Chinese markets and address the question to be answered. The second part reviews the relevant literatures. The third part analyze the features of the Chinese IPO market and impact of the underpricing to the evolution of the Chinese securities markets. The fourth part start up the formal statistic analysis with the distribution characteristics of the underpricing. The fifth part calculates the relevance coefficient between some parameters like offering price ,volume. market-to-earnings, etc. The sixth part testthree kinds of popular theoretical models, but the results prove that these models do not hold in the Chinese circumstance. A new explanation model is put forward in the seventh part, with the deduction consistent with the statistical analysis outcome. Conclusion, as well as the suggestion on the design of regulation policy, is made in the eighth part.