A Study Of The Factors Influencing The First-day Stock Price Performance Of Hong Kong IPOs

The over-the-counter2(OTC)market(hereinafter abbreviated as "OTC",this paper refers to "dark trading")is a unique trading mechanism in the Hong Kong IPO market.Based on the basic theories of traditional finance and behavioral finance,this paper explores the first-day performance of Hong Kong IPOs from the perspective of OTC returns and investor sentiment,and investigates the correlation between OTC returns and first-day returns.After reviewing and critiquing the domestic and international research literature and introducing the institutional background of the Hong Kong IPO market,the article proposes the core research hypothesis that OTC returns are strongly and positively correlated with IPO first-day returns,all else being equal,based on investor sentiment theory on the IPO first-day return issue.To verify the research hypothesis,this paper establishes a multiple regression model and conducts an empirical analysis using 608 successful IPOs of Hong Kong IPOs from 2018-2021 as the sample,with first-day return as the explanatory variable and OTC return as the explanatory variable.The main regression results of the empirical analysis show that there is a significant positive correlation between the explanatory variable OTC return and the explanatory variable first-day return at 1%confidence level,while the robustness test,endogeneity test,and heterogeneity analysis further corroborate the results.Finally,based on the findings derived from the empirical evidence,the relevant implications for the IPO policy mechanism of Hong Kong stocks are discussed.On the transmission mechanism,according to the theory of investor sentiment in the context of behavioral finance,the logic of the impact of investor sentiment on future stock price volatility lies in the positive feedback amplification of positive news and negative news step by step.The first-day yield expectations of Hong Kong IPOs by limited rational investors are reflected in advance through the price fluctuations of OTC transactions.The positive and negative OTC yields reflect the extent to which different investor sentiments lead to deviations of IPO prices from their values,and are reinforced by positive feedback mechanisms for optimism or pessimism,which are further transmitted to the market performance on the first day of trading,resulting in excess initial yields on the first day of trading(The positive feedback mechanism reinforces optimism or pessimism,which is further transmitted to the first-day trading performance,resulting in excess initial yield("depressed" issue)or breakage("premium" issue).Through theoretical research and empirical analysis,this paper argues that the performance of OTC trading quotes of HK IPOs can play an important role in predicting the first-day stock price trend,thus providing direction for HK IPO trading strategies.OTC returns are an important sentiment indicator affecting the first-day returns of HK IPOs,and investor sentiment is a key factor in the pricing of IPOs in the secondary market.The empirical analysis of this phenomenon is helpful to help investors to establish a correct investment philosophy,improve the resource allocation function of the Hong Kong IPO market and enhance the efficiency of IPO pricing.