Research On Excess Return Of IPO On The First Day After Going Public

The excess return of IPO on the first day after going public is one of the most difficult subjects in the finance area all the time. Economists around the world have devoted much time and energy on it, but there is still no theory could explain this problem perfectly.China has the most serious problem of IPO all over the world. In this article, the author will compare the factors that are related to the problem of IPO in different periods. On base of the analysis, the author will discuss the mistakes of system reforms for IPO in order to explore the new ways for further reform.The researches on the excess return of IPO problem always only focus on the first market or the second market. But considering the particularity of Chinese stock market, the author takes the two markets into account. Through the basic analysis of relative price of IPO after going public, the author makes the relative price in one year as the real value of the company. The high return of IPO is divided into two parts: the underpricing in the first market and the bubbles in the second market. The special important type of participators in Chinese stock market are the unrational investors.Through the reviews of the IPO system reforms and pricing ways in China, the author makes two research periods, divided by the year of 2001. According to the regression results in the same period of different markets, we can find there are such unrational investors who influence the two markets ,and make the problem of IPO serious. Besides, we can find out the system reforms of IPO in China is not in good effect through the regression results in different periods of the same market.Further, we will explore the root of the unrational investors in China is the background of non-tradable shares, and the reason for no effect of the reforms is the wrong orientation of the government.