Research On The Effects Of Investor Sentiment For A-Share IPOs Initial Excess Returns

IPO initial excess return has always been an unavoidable problem in our A share market. Many doubts have been raised about that, why the abnormal phenomena of IPO initial excess return over a long-time? Why china petroleum’s P/E as high as80times, there are still so many investors to buy. Investor behavior has been to make people difficult to understand, but it is real happened in the stock market. The traditional finance theory cannot explain the financial abnormal phenomena.So this article will be on the basis of the behavioral finance theory to study the effect of investor sentiment on IPOs initial excess returns. Different from the Traditional financial theories which based on rational people hypothesis and efficient market hypothesis, behavioral finance theory is based on the irrational investors assumption and limited arbitrage. It derives from psychological principles, focusing on the influence of human behavior on the decision making and asset pricing. And to establish the behavioral finance model to research this anomaly phenomena. So this article introduces the DHS, DSSW model of behavioral finance.Measure of investor’s emotion is a primary issue in this paper, as the investor sentiment is a subjective concept, we cannot measure it directly. So we are looking for other ways, to choose those indirect markers of investor sentiment as the mood proxy variables. Finally this article selects WPE, LotRate, AOIR, FDTR, Investors, CCI, SDIndex, HDIndex as the mood proxy variables, Represent the investor sentiment and positive feedback traders. In the setting of related variables, we introduced company sizes and industry type as control variables. In order to eliminate other factors that affects the initial excess return of IPO.Since2006is the first year of reform of non-tradable shares, and the stock unseasoned issuance system reform is so big. So this article selected on June1,2006to October31,2012, in our initial public offering and listing of1134A-shares samples for empirical research. The article adopts manual to collect tens of thousands of relevant data, then carries on the regression analysis using R software to study the effect of investor sentiment on IPO initial excess returns, and has carried on the robustness to model test, and confirm the reliability of the model.Empirical study results show that investor sentiment is the main factor causing a-share IPO initial excess returns. The fanatical investor sentiment is the main cause of IPO initial excess yields, and to further improve the IPO initial excess yields positive feedback traders.According to the research conclusion of this article, suggest that regulators to make the market rules and coordinated. Strengthen education guidance, perfect the system construction. Prompted the development of China’s securities market stable, balanced and healthy, and fully demonstrate the stock market in the allocation of resources, each function of signal transmission and price discovery.