The Study On The Price Discovery Function Of Chinese Stock IPO

In the early 1990s, two Stock Exchange Corporations was set up in Shanghai and Shenzhen one after another. It marked the initial starting of China's capital market. In less than 20 years, China's stock market developed ahead by leaps and bounds. So far, it has developed a multi-level form of marketing system, such as main board market, junior stock market, B-Share market and so on. The sort of the deal involves stock, bond, fund, warrant, etc. Meanwhile, the number of investors has increased rapidly. By the end of 2008, the number of Chinese shareholders has reached 130 million.As the issuance market, the initial public offerings of common stocks, the source of the securities market, is the basis and prerequisite of a trading market. The stock can exchange in the circulation market only when it is supplied in the issuance market. The scope and operation of a issuance market depend on the kinds, amount and the issue model of stock in the IPO market. In the view of the functions of the IPO market, its basic aspects lie in four major functions: finance and investment, price discovery, resource allocation and information production. Price discovery is of paramount importance among the rest. The price discovery of stock market is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers.The issue of price discovery in the IPO market has been brought into focus, which relates to the benefits of each market player, such as regulator, publisher, underwriter and investor. This article shares of Chinese IPO price discovery function, the securities sector will contribute to more effective and rational development of market supervision policies, market development objectives and a clear direction for reform, will also help the stock issuers, investors and investment banks in the real Treasury operations in the course of normal operation and rational operation, upgrading Chinese IPO market share of efficient price discovery.Based upon the existing related researches in our country and abroad, the paper begins with analyzing the correlation theory of price discovery in the IPO market; next we turn to the process and the influence factors of price discovery in Chinese IPO market; then we use the experience of the market effective empirical hypothesis testing methods which are made by the domestic and foreign scholars to carry on an empirical test about effectiveness of the weakness of Chinese IPO market( Primary market) in order to prove the efficiency of price discovery in the Chinese IPO market; at last, according to the the abnormal phenomenon which will take place in the process of price discovery, we carry out a multi-factor regression analysis to point out the influencing factors and to table a series of relevant proposal.Through an empirical research, the article draws the following three conclusions: First, the different profit objectives of differen market players such as regulator, publisher, underwriter and investor will have different impacts on the price discovery of Chinese IPO market. Approval System and sponsor the implementation of the system more conducive to the stock IPO price discovery function, at the same time, China is not high quality investors to curb Chinese IPO stock price discovery function. Second, the Chinese IPO market has not reached to the standard of weak effectiveness yet, and the efficiency of Chinese price discovery is not that high. Final, the main factor which effects the IPO's issue underpricing comes from four different aspects: government and regulators, publishers, underwriters and investors.For the conclusion of the study, the paper makes the following proposals to solve these problems: (I) Strengthen the rational concept of the market and cultivate the sophisticated market players. Allow the market to the main principles in a rational market, under the guidance of the activities carried out. (II) Vigorously develop the capital market and actively guide the investment behavior of the multi-market. A fundamental solution to the situation of lack of financial products to balance supply and demand of financial products, the emergence of asset bubbles contrary. (III) Enhance the transparency of the approval process, reduce the redundant aspects and the processing time. This can be reduced in addition to the emergence of corruption, but also approved to reduce costs and improve efficiency. (IV) Improve the system for IPO and listing on stock market, change the stock approval system to registration system gradually. Approval System, after all, only a transitional measure, on the experience of mature markets in developed countries, the full market-based registration system is an effective ultimate goal. (V) Regulate the underwriters' behavior and boost their reputation. So as to enhance the process of issuing new shares of the company pricing information on the infiltration capacity of the transmission of information to enhance efficiency and new IPO price discovery efficiency. (VI) The retail client should adjust the state of mind actively and build up a proper view of investment. Cultivate the idea of a rational investment.