Research On The Impact Of Investor Sentiment On IPO Underpricing

IPO underpricing refers to the shares listed on the first day is generally can get excess returns(closing price far above the initial opening price),foreign scholars think that the primary market under the assumptions of traditional finance research pricing too low is the main reason why this phenomenon appears,think the first day of IPO excess returns are the securities market in order to effectively response the information value of listed companies,to the primary market issuers,underwriters and investors to provide compensation and issued at a discount,due to so called IPO underpricing.With the vigorous development of behavioral finance theory in the 1990s,scholars all over the world have a new understanding of this phenomenon on the basis of behavioral finance.Some scholars believe that the inefficiency in the secondary market--overpricing--leads to high IPO underpricing rate,and investor sentiment is one of the main reasons why the secondary market price deviates from the intrinsic value.A large number of empirical studies also show that investor sentiment is positively correlated with IPO underpricing.China’s securities market was formed late,and neither the issuance system nor the market participants are perfect.The phenomenon of IPO underpricing in China is more prominent than mature capital markets abroad.It is a positive role for the health and stability of our capital markets to study the cause of the high prices of our IPO.The government’s system,including the listing system,also has a certain impact on the IPO underpricing to a certain extent.The irrational behavior of investors has always tended to increase the circulating price of new shares,but under different IPO systems,the role of investors’ behaviors is different.By studying IPO underpricing in different markets(main board,small and medium board and gem)in different periods of China,this paper discusses the influence of investor sentiment on IPO underpricing under different IPO systems.Before in the aspect of theory,this paper first introduces the domestic and foreign scholars to discuss the root cause of the IPO underpricing,and combining the behavioral finance,and the situation of our country the mechanism of the effect on investor sentiment IPO underpricing has carried on the preliminary analysis.In empirical aspect,this article selects the Shanghai and shenzhen a-share market from January 2010 to December 2017,1724 IPO samples was investigated,on the basis of previous studies,by using the method of principal component analysis to build A comprehensive index reflecting China’s a-share market sentiment,and then on the basis of combining the relevant control variables and the IPO first-day returns to build a multiple regression equation.Considering that China has set limits on the first day of new share issuance after 2014,this paper uses the number of days after the listing of new shares to represent the excess return rate of new shares.The empirical results showed that in different periods,different market in our country the influence degree of investor sentiment on IPO underpricing is different,at the same time,the uncertainty of information and the company size can also lead to investor sentiment to a certain extent influence on IPO underpricing degree is different.Finally,based on the results of empirical test and relevant theoretical analysis,this paper puts forward corresponding suggestions to China’s stock market policy and investors.