IPO Price Formation Mechanism And Underpricing Study On The Basis Of Irrational Behaviors

The research aim in this paper is as follows: On the basis of some studies on the effect of the land right steady on household invest and rural land system performance and the relationship between rural land system and agricultural economic growth, we will put emphasis on discussing the performance appraising systems of the land ownership and the land use right in this paper and search the reform road to the rural land system in China through comparing the two system performance. We will regard the rural land system as the research object and use the empirical analysis and the normal analysis according to new institutional economics.Studies on new stock's offering pricing and underpricing have already widely drawn the scholars attention home and abroad, but the studies on new stock's pricing almost concentrate on explaining the underpricing of new stock, as well as testing the accounting information content. However, these studies can not guide the underwriters, especially the Chinese underwriters, who are in a newly emerging and transitional market. Chinese securities market has many characteristics of its own, so in the process of practical underwriting, the underwriters are eager to find a theoretical evaluation model, which suits for the situation of China and can improve the level of pricing. But, there has been no study on new stock price activity in Chinese academe yet. While, because of the differences of market maturity extent and issuing system, the study on evaluation model, which is used to study offering price of new stocks becomes extremely valuable. So this dissertation tries to describe what Chinese medium and small investors think of the IPO price formation mechanism form the perspective of irrational behaviors of Chinese medium and small investors.IPOs underpricing phenomenon has always been considered as one of hot spots in new stock field, even in securities market, and it has also attracted many scholars attention. In order to explain the IPOs underpricing phenomenon correctly, we have to study the relationship between offering price and initial close price systematically, but relative studies show that the problem is not so simple. Essentially, these phenomenons involve many aspects, such as information asymmetry, underwriter's self protection, and so on. Many scholars have already tried to establish various models and hypotheses in order to find out the real reason of IPOs underpricing. Although they have made some achievements, there has been no theory that takes the dominant position. The rise of Behavior Finance and the introduction of the concept of investor's irrationality opened a door to the study on IPO underpricing and price formation mechanism.So this dissertation tries to make use of some concepts relative to investor's irrational behaviors in Finance to discuss the IPO price formation mechanism and underpricing, which are under the Checking System and Inquire Price System in our country, from the perspective of Chinese medium and small investors'irrationality.The previous studies on IPOs pricing described the price formation of IPO from the aspect of issuer and underwriter, while, this dissertation tries to dissertation tries to describe the price formation of IPO from a new perspective, i.e the investor's irrational behaviors. The reason why this method is feasible is that the Inquire Price System under the Checking System is implemented in our country. This system is a marketization prizing one, and it requires the investors to be involved in so as to establish reasonable prices. So theoretically, the investors are not passive price acceptors any more. Therefore, this dissertation discusses the influence the medium and small investors make on the IPO price formation under Inquire Mechanism by introducing in the Investor's Psychology Model from Behavior Finance. By learning from BVS Model and combining the reality of China, the writer establishes a medium and small investor's basic psychology model and extended psychology model in this dissertation. On the basis of this, two kinds of investor's psychology model are introduced into IPO Evaluation Model, in order to discuss the influence the medium and small inventors make on the IPO price formation mechanism under these two models respectively, and then we get an IPO price theory on the basis of those two kinds of psychology models. It analyzes the IPO price formation mechanism based on the Chinese medium and small investors'psychology models theoretically, and discovers the fact that the investors'irrational behaviors cause price to deviate from value. And this discovery helps the issuers and underwriters realize that under Inquire Price System, the medium and small investors influence the formation of IPO price. And it also provides them with theoretical support for making reasonable IPO price.Because the Chinese stock market doesn't have a long history, the investors are not mature. And from the studies mentioned above, we can know the investors do influence the IPO price. So the writer believes that the IPO underpricing of our country is relevant to investors'irrational behaviors. Learning from Ljungqvist,Nanda and Singh's model, and combining it with the reality of China, the writer reforms this model. Starting from the fact that Chinese IPO issuers aim at collecting the funds to the largest extent, the writer presumes that the issuers, underwriters and organization investors colludes together so as to grab the consumer surplus. On the basis of this idea, the IPO underpicing theory model relative to the situation of Chinese stock market is established in this dissertation, so as to discuss the underpricing phenomenon of IPO in our country. By discussing the models, we can get a conclusion that the IPO underpricing in China may be relevant to the irrational deals of vast irrational medium and small investors of our country. And their irrational dealing activity may be one of the factors that cause IPO underpring.This dissertation makes use of the Stochastic Frontier Model to prove that the irrational behaviors of medium and small investors may exist in IPO understanding in China. On the basis of the irrational investor's characteristics, this dissertation looks for relevant explanatory variables, takes advantage of the methods from econometrics, in order to test the IPO underpricing in our country. Then, basing on the result of the test, this dissertation explains the relativity between the underpricing and various explanatory variables, and tests the conclusion of IPO underpricing model, i.e irrational investors'irrational behaviors may be one of the factors resulting in the IPO underpricing in China.The following are the innovation of this paper:Firstly, this dissertation takes advantage of Investor's Psychology Model of Finance, combine it with the reality of our country, introduce the Chinese medium and small investors'irrational behaviors into this model, and estimate the IPO pricing formation mechanism form the perspective of investors, and then it obtains a basic representation of IPO price. Then, it presumes that the investors put the organization investors into consideration to describe the changes of IPO price, so it extends this model, from which we find out that the investor's irrational behaviors result in value deviation.Secondly, Learning from Ljungqvist,Nanda and Singh's model , and combining it with the reality of China, this dissertation reforms this model. Starting from the fact that Chinese IPO issuers aim at collecting the funds to the largest extent, the writer presumes that the issuers, underwriters and organization investors colludes together so as to grab the consumer surplus. On the basis of this idea, the IPO underpicing theory model relevant to the situation of Chinese stock market is established, so as to discuss the underpricing phenomenon of IPO in our country.At last, this dissertation makes use of Stochastic Frontier Model to prove that the medium and small investors'irrational deals do exist in IPO underpricing in our country. And this dissertation establishes and designs the indexes which are only relative to investors'irrationality (the indexes irrelevant to irrationality are excluded). And the writer makes empirical test on the underpricing model mentioned above through establishing statistics model, too.