The Research On The Cyclical Behavior Of IPO Market Of China Based On The Markov Regime-switching Model

Initial public offerings (or IPO) have attracted substantial investor and public interest. In part, this interest is stimulated through suggestions of underpricing. That is, there is a market folklore that potential trading profits can be made from "mispricing", especially in the early days of listing. IPO are a relatively frequent phenomenon.Research into IPO has generally fallen into three main categories. First, the issue of short-run performance that IPO tend to be underpriced. Second, a group of papers have examined the long-run performance of IPO. Generally, the tracking of price performance over a number of years following listing has shown that IPO tend to under-perform established benchmarks. A third category of research has the suggestion that the IPO market exhibits cyclical patterns which are characterized by a high volume of new issues and substantial underpricing, such that "hot issue periods" exist. The researchers can't figure out why, so they call it a "puzzle".This paper makes an introduction on the research clue and framework at first, and summarizes the prior literatures on the IPO. In part 3 of this thesis, this paper introduces the Markov Regime-switching model, and based on this method, making a positive research on the IPO market of China, and draw a conclusion that the hot issue market does exist in China IPO market, and there are different characteristics in different times, for example, sometimes the initial return rate is very high while sometimes the issue volume is very huge, furthermore, the hot issue market is not determinated simply. This paper analyzes the results and makes a proposal for further research.