A Research On Investment Performance Of IPO: Based On Perspective Of Investors' Sentiment

Since 1960s, IPO (initial public offerings) underpricing was discovered by scholars from various countries. The abnormal performance of IPO after listing has been a hot issue in finance and became a mystery in the field of finance. IPO's abnormal performance is mainly about the short-run underpricing and the long-run pricing. Scholars made all kinds of research on this phenomenon from the perspective of symmetric information and asymmetric information and proposed a variety of different theory into the interpretation of this phenomenon. In recent years, with the development of asset pricing theory, it was found that the overall level of investor sentiment affect asset prices, thereby affecting the investment performance of assets, under the condition of asymmetric information. Many traditional theories assumed that there is serious information asymmetry in the IPO market. Under the condition of asymmetric information, investor sentiment may affect the short-term investment performance and the long-term investment performance of IPO. The contradiction of Early and long-term performance of IPO means that investors demand for new shares of the investment is temporary (such as the sell-off after the purchase, rather than the long-held), this temporary demand may due to investor sentiment.In this thesis, we use the theory of behavioral finance to study the two abnormal phenomena of the performance of IPO and make empirical research on investment performance of IPO from the perspective of investor sentiment. In the end, I find that the investor sentiment is an important factor that impacts the investment performance of IPO. In this thesis, we use the allot rate to divide the all IPO samples from 1997 to 2006 into high-active group, middle-active group and the low-active group and then examine the performance of each group. We find that the initial rate of high-active group and middle-active group is higher than the initial rate of the low-active group but the long-run BHR (buy and hold rate) of high-active group and middle-active group is lower than the BHR of the low-active group. We used allot rate, market-to-book value, turnover rate and the average discount or premium rate of closed-end fund in the first listing day as the investor sentiment indicators. We make regression analysis using these indicators as independent variables and use the initial rate or the three-year buy and hold rate as the dependent variable. We conclude that the high investor sentiment in the IPO market has led to the excess returns on the first day of IPO, resulting in a speculative bubble. After the initial public offering, the degree of information asymmetry gradually reduces and the investors make more rational judgments about the intrinsic value of IPO. In long-term, the prices of IPO gradually return to its intrinsic value, resulting in poor performance of the IPO long-term phenomenon.