IPOs Underpricing Under Investor's Behavior Decision-making

The paper mainly focuses on the high underpricing phenomenon of IPOs (Initial Public Offerings) of Chinese security market. Classic study of the theory and method of IPOs underpricing are based on the most traditional area of finance, but the paper mainly study high IPOs underpricing within the behavioral finance. Behavioral Finance is a comprehensive psychology and sociology to study the emerging discipline of financial markets that its approach is more close to reality, the market is more concerned about the decision's own factors. Its theoretical framework is based on Prospect Theory through their own study of the factors influencing the investment decisions of investors as well as the impact of the economic decision-making lead to the outcome of the approach to solve some traditional finance difficulty to solve the financial anomalies.Causing the high IPOs underpricing is the unbalance between supply and demand, so we should emphasis the investor's behavior decision-making under the Behavior Finance. Regarding the specific scene of stock market, we need to determine whether the investor will attend the market, that is, whether investor can get his own great satisfaction from the investment decision-making. If we assure the above analysis, then we should find the critical reasons which determine investor's extent to the investment, finding the indicator is the key of the article.In order to solve the above two problems, firstly we describe the investment decision-making to new stock and summarized this process by the Value Function , to obtain the investor do participate in the new stock; secondly we resort to the Investor Fund Most Superior Arrangement Model, to obtain the investor would do decision by Lot Winning Rate . Through the above analysis, we can draw a conclusion that it is the investor has the very strong homoplastic investment to the new stock causes high IPOs underpricing.