Study On The Effect Of Investor Sentiment On Ipo Underpricing In China

In more than20years development of China’s stock market, the exploration of the reform of Initial Public Offerings (IPO) has not stopped. IPO underpricing access to some of the lower levels following the IPO market enhancement, but investors’ appetite for speculative fever has not been fundamentally alleviated. High IPO underpricing seriously affected the market financing capability and the efficiency of resource allocation. Currently China’s IPO market at a crucial period in the eighth after a pause to be released, in this context, this article explore the causes of IPO underpricing in China and to make relevant policy recommendations based on the research findings from investor sentiment perspective. The theoretical and practical significance are essential during the research.This article analyzed the phenomenon of IPO underpricing firstly, and found as around securities market IPO high yield rate of constantly emerges, focus of scholars’ concern began by primary market steering secondary market, based on the research of primary market and secondary market of IPO underpricing theory and the combines of China’s stock system features of IPO underpricing. Secondly, through conclusion of investors mood by different measurement method, a composite indicator of investor sentiment index to more fully reflect the market situation were found. At the same time, combined with the Miller model, DSSW model, DHS model in emotion impact on IPO underpricing analysis mechanism again, combined with the characteristics of the IPO market in China, from two angles the primary market and secondary market IPO underpricing impact indicators were summed up. At last, using data during June2006and October2012in the A share market IPO stocks as samples for empirical research, and using SPSS in principal component analysis method for building a composite sentiment indicator (ISCI), based on the introduction of the size of the offering and the enterprise mainly stepwise regression analysis of financial indicators, this article studied investor sentiment changes impact on IPO underpricing in different periods.Research results indicate that, China’s IPO underpricing is in higher rate for a long-term and fluctuations range larger. Main factors effecting IPO underpricing are composite investors mood index for the period, release scale, PE, ROE, and EPS. Ahead of one period, and ahead of two period of composite investors mood indicators ISCIt-1、ISCIt-2are related, indicating investor sentiment are important for high IPO underpricing in Chinese stock market, and causes of the phenomenon and fluctuations in investor sentiment ahead of the market reaction. Therefore, in order to further development and perfection of the IPO market, we still need to enhance investor education, improve the disclosures, made sustained efforts in several areas, such as implementation of the reform of the distribution system.