A Study On Investment Behavior In IPO Market Based On Investor Sentiment Theory

The agent is rational and the market is efficient in The Modern Financial Theory (MFT). So the investor behavior has no influence on financial market, even if there are irrational investors, they will be wash out by the arbitrageurs. So it is not significance to research on investor behavior. But the Behavioral Finance Theory (BFT) relaxes the rational agent hypothesis and gives the explanation more close to the reality than MFT. The investor behavior has more influence on asset pricing and financial market in BFT.The thesis is focuses on investor sentiment and the influence on investor sentiment. And try to find the mechanism of the investor behavior based on investor sentiment influencing the asset pricing and economy development.The thesis contains four main Parts. Chapter two is the literature review, analysis and commentary from the asymmetric information theory and behavioral finance theory. After the1970s, scholars began to pay attention to the IPO market and found that the IPO market has three visions-underpricing, long-term weaknesses, and the hot city phenomenon, research is emerging. Early studies from the asymmetric information theory, that underpricing is due to information asymmetry between the IPO market participants, and all kinds of information is uneven stock price artificially low, which we called underpricing.In the late20th century, more and more scholars study from the perspective of behavioral finance research on the IPO market, and the extra returns comes from the first day trading.Chapter there focuses on the mechanism of investor sentiment to behavior. The thesis research investor decision-making model through cognition structure, information processing and decision motives. The agent decision-making is constrained by intuition system and reasoning system.Chapter four is analyzing the emotional behavior in the IPO market. Starting about the generalized emotional theory, factors that affect investment decisions are divided into the market, company’s quality and the issuing conditions.Chapter five is the empirical analysis. This article selects500IPOs in Shanghai and Shenzhen market from January2010to June2011. Small board and GEM listed company’s financial position are significantly superior to the mother boarde especially GEM is the most prominent. Sequential grouping of explanatory variables to analyze the emotional factors and investment behavior, further multiple regression model, to explain the effect as well as variables significant draw emotion theory explain IPO market investment behavior the explanatory power of market and distribution factors can be used as factors affecting investor sentiment.At the end of the thesis, the conclusion, the suggestion and the future works of the thesis are giving.