Reserach On The Abnormal Initial Return Of Chinese IPO Market

The phenomenon of IPO's abnormal initial return has been prevalent in many countries'IPO market around the world, whether it is emerging security market, or mature security market. China's stock market has higher IPO initial return rate since its establishment, this phenomenon not only increase the price shocks in primary market and secondary market, but also hinder the financing and resource allocating function of capital market. As a result, many scholars at home and abroad have done a lot of theory and empirical research on this topic, early research tended to interpret them from the perspective of primary market underpricing, then the development of behavioral finance provided a new basis for research, that is secondary market premium, the above studies have drawn many useful conclusions.In view of this, this paper uses the existing research review as a start, to make a summary on the research results of scholars from home and abroad, then we give an overview of formation mechanism of primary market underpricing and secondary market overpricing. In empirical research, this paper uses 908 stocks listed from 1998 to 2009 as the research sample, and uses comparable company methods to determine the fair price of IPO stocks, and on this basis to separate the primary market underpricing and secondary market overpricing. The empirical results show that success rate, starting price-earning ratio, price-earning ratio control and issuing system have significant impact on primary market underpricing; turnover on the first day of listing, historical average abnormal return and capital market condition have significant effect of secondary market overpricing.By analyzing the empirical results, we find that to rationalize the abnormal initial return requires the common endeavor of issuers, underwriters, regulators and investors:to improve the process of market-oriented pricing mechanism; focus on the construction of issuing system, promote the transition of approval system to the registration system; to full play the government's regulatory role in the stock market; to promote the healthy development of financial market, and cultivating rational investments.