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The Study Of The IPO Pricing Based On The Option Pricing Theory

Posted on:2004-09-08Degree:MasterType:Thesis
Country:ChinaCandidate:Q W ZhangFull Text:PDF
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Initial public offering is the most important way to raise capital for joint-stock companies. Since China has transferred gradually from a planned economy into a market-oriented economy, state-owned enterprises want to realize separating property rights from operation rights. At the same time, IPO in China also undergo from administration pricing to market pricing. During the beginning stage of stock market, government intervened the issue quantity, the price and the selling ways. All of these hindered the development of market. All over the world, IPO has three abnormal phenomena, underpricing, long-term underperformance and hot issue, which are also puzzles perplexing financial circle.The aim of this article is to give some advice for marketilization of Chinese stock market. And the article emphasizes on IPO pricing models, including in theoretical method and in empirical method.In theoretical part, traditional IPO pricing models are discussed, and their application is analyzed, based on reviewing the "reform" history of Chinese IPO. Furthermore, a new IPO pricing model is put up, which embraces "option" thought. We find that option value of Chinese hi-tech enlisted companies is about 20% of IPO price, which is one of chief reasons of high underpricing in China through numeric calculation.In empirical part, we research on three abnormal phenomena in IPO, including underpricing, underperformance and hot issue. And methodology is divided into two steps. Firstly, factors of underpricing and underperformance are determined through single-factor AN OVA (analysis of variance). Therefore, a multi-variable linear regression model is established. It is found that Chinese underpricing is highly related to factors such as primary shares, P/E ratio, according to empirical study. It is also found that Chinese IPO price trend is rather stronger than the market within 14 months, and obviously weaker than the market in 15-37 months.It is finally concluded that (1) the marketilization degree of Chinese IPO rises up step by step, (2) it is not a good idea for IPO in small amount, (3) marketilization reform of Chinese IPO should be more cautious than ever before, and (4) authorities shouldregulate and supervise the time of certain company, according to its attribute of industry, in order to allocate financial resources efficiently.Zhang qingwei (finance) Directed by Yang chunpeng...
Keywords/Search Tags:Initial public offering, option, underpricing, long-term underperformance
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