An Empirical Study On The Influence Of Investor Sentiment On Ipo First-day Return Rate

The first-day earnings of IPO is an important issue currently studied all over the world.Due to the difference between the IPO price and the first-day IPO price,investors of new shares obtain excess earnings.Traditional financial research focuses on analyzing the effectiveness of the secondary market,that is,the actual value of listed companies will be reflected through their IPO returns.Many documents have explained this phenomenon in the research.They believe that the foundation of the underpricing theory and the premium theory is the asymmetry of market information and the excess returns,which is the compensation behavior provided to underwriters and investors by the channel information for IPO demand and pricing released by institutional investors in the securities market.However,although the current research provides certain theoretical basis for the underpricing behavior of the primary market,it is still unable to explain the long-term weak phenomenon in the IPO process of enterprises.Therefore,researchers started research on the secondary market to verify whether this premise is an effective assumption of the market.Through the research and analysis on the rationality of the closing price of IPO enterprises on the first day,and combined with the theoretical tools of behavioral finance,investors’ behaviors in the secondary market are analyzed.It is concluded that shares are affected by investor sentiment.In the stock market,investors are not in a higher rational state with changes in the trading environment.Stock prices will bear the corresponding changes in investor sentiment,making the actual price lower than the secondary market price,thus causing IPO underpricing.Behavioral finance has developed rapidly since the end of last century.More and more researchers believe that the secondary stock market is not always effective enough.Excessive trading price on the first day may also lead to excess return on the first day of IPO,which can be explained by the lower IPO price of IPO enterprises and the premium of the first day’s share price on the secondary market.In the past 40 years of reform and opening-up,China’s financial market has emerged from scratch,especially in the past 20 years,the exploration of stock exchange market has also made outstanding achievements.However,the excess return on the first day of IPO is still relatively outstanding,which requires in-depth analysis and research based on behavioral finance and investor sentiment.Therefore,this paper attempts to select the emotional proxy variables of investors in different levels of markets from the perspective of investor sentiment to discuss the first-day return of IPO.The author not only theoretically introduces the mechanism of investor’s investment behavior and investor’s sentiment affecting IPO first-day returns,but also through the investigation of IPO samples of 78 agricultural listed companies in Shanghai and Shenzhen A-share markets during the 25 years from March 1994 to March 2019,establishes a vector autoregressive model between the calculation of investor sentiment index and IPO first-day returns,and observes the relationship trend between investor’s request and IPO first-day returns in different periods.Through the combination of theory and practice,the author found that during the approval period,investor sentiment and IPO first-day returns showed relatively obvious dynamic changes.However,in the approval system period,the relationship between investor sentiment and IPO first-day returns and stock returns is not obviously dynamic.