Behavioral Underpricing Research To IPOs Of Chinese Security Market

The paper mainly focuses on the high underpricing phenomenon of IPO ( Initial Public Offering) of Chinese security market. The classical methods and theories to research the underpricing of IPO are under the traditional financial theories and frameworks, but the paper mainly uses behavioral finance to research the high underpricing of Chinese security market from the behavioral factors. For the traditional finance exists the faults that can't be overcame by itself, the behavioral finance appears, which is a new science that applies psychology and sociology to research financial markets, and based on prospect theory, the behavioral finance emphasizes on diversity of the investors and then solve a lot of financial unusual phenomenon that can't be solved by traditional finance.Based on some hypothesis, the paper firstly quotes the noise trade model of noise traders (called DSSW for short), believes that the noise is an important behavioral factor which makes the high closed price of the first day of new stocks and then noise forms the high underpricing. Through stating related dates of the A-share IPOs in Shanghai stock market between 2000 to 2003, the conclusion of demonstration shows that: there exists high noise on the first day of the new stocks and the noise increases the distance between the open price and the closed price, and then form the high underpricing; noise is the important behavioral factor to influence the high underpricing of the new stocks. Standing on that"noise is the important behavioral factor to influence the high underpricing of the new stocks", the paper fatherly classifies the investors to rational investors, noise investors, overconfidence investors and un-information investors, through the overconfidence static equilibrium price and the overconfidence-noise static equilibrium price, calculates their expect returns and then conclude the behavioral underpricing model of the new stocks. In the model, the total underpricing of the new stocks is made up by rational underpricing, noise underpricing and overconfidence underpricing, and the total underpricing is the increasing function of the degree of noise and overconfidence.