| As an important IPO anomaly, IPO underpricing has been a research focus in finance for a long time. Existing researches have tested many theoretical explanations for IPO underpricing of Chinese market, such as "information asymmetry hypothesis" and "investor sentiment hypothesis", but there are few in-depth study of the economic mechanism behind the IPO underpricing formation. Therefore, based on 200 IPO stocks listed on ChiNext Board of Shenzhen Stock Exchange from January 7, 2011 to October 9, 2012, this disseration examines how media coverage affect IPO underpricing through investor sentiment.Specifically, by calculating intrinsic value of new shares to decompose IPO underpricing into relative price level of primary market and that of secondary market, this thesis studies how media coverage affect the two parts separately. It finds that media coverage affect IPO underpricing mainly by pushing up the closing price on the first trading day of IPO in secondary market, rather than the issuing price in primary market.Moreover, this thesis studies how media coverage affect IPO underpricing through investor sentiment, which is measured by turnover. It finds that media coverage pushes up the stock price of secondary market and IPO underpricing mainly in the way of overheating the investor sentiment of secondary market.Furthermore, based on the unique account-level trading dataset from Shenzhen Stock Exchange, this thesis identifies frequently investors as someone who participate in 50 and more than 50 new shares on IPO’s first trading day. Frequently investors participate in trading new shares frequently with the speculative motive, their behaviors are largely driven by their sentiment. This thesis further finds that media coverage pushes up the stock price of secondary market and IPO underpricing by overheating the sentiment of frequently investors. This thesis provides important implications for regulating and guiding the behavior of the market participants in the China IPO market. |
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