Grey Theory Empirical Analysis Of China's New Share Issue

Little risk, high returns, great oversubscription and high turnover of Initial Public Offerings (IPOs) are long-standing obvious features of Chinese capital markets, which damage the market efficiency and the resource allocation efficiency. To solve . these problems, in 1999 the government began to advance the institutional reforms in Chinese IPOs market, and realized the conversion from examination and approval system to checking system in April of 2001. But how well it runs? There are some studies on this problem, which still have some shortages. This paper will study this problem in order to provide some policy on institution reform by institutional analysis and empirical research.First, this paper introduces the main theories and developing trend of IPOs problems in abroad, analyses and appraises the domestic study on IPOs problems. Thinking that statistic method works restrictedly for our primary stock market's characteristic of little sample and great variability, then, this paper introduces grey system theory and grey relational analysis method, and improves the computing of grey relational degree, which will provide theory and method for the following empirical research. Finally, this paper makes institutional analysis and empirical research on domestic IPOs problems. After reviewing the institution reform on the primary stock market in our country, this paper selects some IPOs as two samples, which are listed in Shanghai stock exchange in 2000 and 2003, and analyses the whole IPOs price course (issuing, purchasing, marketing, one year after marketing) by grey relational analysis method.The empirical research shows that the reforms did not improved the market efficiency obviously, because it neglects the natural relation between the primary and the second stock market. It is just sectional and formal without solving the essential problems of limited stocks supply and the aftermarket inefficiency. So, the corresponding suggestions are: solving the fundamental problems first, which may perfect the security market further; at the same time, relaxing the stocks supply limitation; moreover, the government needs to realize that the essence of capital market lies in investment and the resource allocation functions, too much emphasis on "capital raising" will be harmful to the further development and internationalization of Chinese stock market.