Empirical Research Based On Behavioral Factors, The Long-term Performance Of China's A-share Market Ipo

This paper employs both event-time study and calendar-time study to examine the three-year performance for 528 new listings of firms on China's A-Share market between 1998 and 2003. The sample displays different performance in different periods when event-time study is employed. Positive abnormal return exists during 1998-1999 period. And underperformance is found during 2001-2003 period. Calendar-time analysis shows that IPOs in China's A-Share market outperform at least in the first 3 years. This paper also studies size and book-to-market factors'influence to the long-term performance of IPOs. IPOs with higher book-to-market ratio perform better according to event-time study. Size factor shows different impacts in different periods. IPOs with bigger size are found to perform better in calendar-time study. And book-to-market factor doesn't seem to have significant impact to the long-term performance. Four behavioral factors were introduced in both methods, they are: monthly average initial return, scaled IPO volume, monthly turnover and difference of monthly closed-end funds discount rate. Behavioral factors show significant impact on IPOs long-term performance. Both study find IPOs issued when investors'sentiment high and market hot performs better in the long-run. This paper also shows that risk of IPO portfolios is slightly higher than market portfolio risk, while IPOs of bigger companies have further higher risk. And in China's A-share market, most companies IPO when they are young, while younger companies'IPOs are incline to have better long-term performance.