Empirical Study On The Abnormal Return Of IPOs In China's A-share Market

The abnormal return of IPOs on the first offering day is one of the three puzzles in IPO studies, and also a hot issue in academy. June10,2009, the CSAR issued"on future reform and improvement of new shares issued guidance system", and resumed the issuance of paused IPO. Whether the reform of new shares issued mechanism has the magnificent effects on decreasing the abnormal return of IPOs on the first offering day considered the China's market conditions and institutional background is the main concern to this article.The article reviews the study on the abnormal return of IPOs by the scholars abroad and home at first and introduces the process of China's new issued mechanism reform. Using sample of A-share IPOs during June19,2006 to June30,2010, the paper performances normative analysis and empirical study and explains the abnormal return of IPOs on the first offering day from the primary market and the market. Study shows that: with the practice of new shares issued mechanism ,the IP0 issue price generally reflects more corporate intrinsic value, the efficiency of China's IPO pricing is increasing. To some extent ,the abnormal return of IPOs on the first offering day is also lower. Meanwhile, there is significant correlation between investor sentiment and the abnormal return of IPOs on the first offering day.The main innovation of this paper is that: from the perspective of institutional factor and behavioral factor, the article studies the practice of new shares issued mechanism and investor sentiment's impact on the abnormal return of IPOs on the first offering day. This is time effectiveness.