The Pricing Efficiency And Impact On Composite Index Of New Stock In Different IPO Systems

The IPO system is composed of the examination and verification system and theallocation and pricing mechanism.As the most important stock market system, the waythe IPO system influence the stock price index is as follow:(1)The first listing dayreturn of new stock is depended on the IPO examination and verification system, whichcontrol the quantity of new stock, and the allocation and pricing mechanism, whichmake the issue price.(2)The long-term yields is depended on the IPO examination andverification system, which control the quality of new stock.(3)The index will changefrom the combined impact of the price volatility of new stock and the new stockproportion of total market capitalization.As a measure tool to reflect pricing efficiency of different IPO systems，the impactof new stock on stock price index reflect the short-term and long-term pricing efficiencyof IPO system comprehensively.Most scholars focus on the excess rate of return in the first listing day of newstocks in different IPO systems and the long-term performance of different IPO systems,the impact of different stock characters on the index, few of them realize the impact ofIPO system on the index.The purpose of this paper is to measure the price efficiency of new stocks indifferent IPO systems by the excess rate of return in the first listing day, the CAR, theBHAR and the impact of new stock on the index in different IPO systems, compare thedifference between each IPO system and give some advices.Base on the comparative analysis of pricing efficiency of different IPO systems,We dram the following conclusions：(1)With the future deepening and perfecting reformof IPO system, which valued the supply and demand of market fully, the pricingefficiency is improving, especially the way combine off-line enquiry and online pricingand the way of new stocks that it allots and sells to investors in second market,both ofwhich under the sponsors system.(2)With the future deepening and perfecting of reformof IPO system, which clarified the rights and obligations between different marketplayer, the supervision from the market was more strict, and the quality of listedcompany is improved.Although the reflection of different pricing efficiency measure tools are almostsimilar, there are still some differences, which is caused by the defects of the indexestablishment method. So we analyse the defects of the index establishment method by case analysis method and get conclusion as follow（:1）The impact of weighted stock onindex is significant, the weighted stocks play the role of stabilizer and the banker canmanipulate the stock market by manipulating the price of the weighted stocks.(2) Thetime when the new share is included in the index has a big influence on the index, theindex will be more affected when the new shares is included on the first day of listingstock instead of the second day or11days later.At last，according to the empirical results and summaries of above, we gives thefollowing advice: Strengthing the education of investors in the market, encouraging andpromoting the growth of institutional investors. Improving the IPO pricing mechanism,making full use of Callback and Green Shoes mechanism.Improving the sponsor systemand clarifying the responsibilities and obligations of Intermediary agencies in theprocess of IPO, preparing for the transformation from approval system to registrationsystem.At the same time, according to the defect of index establishment method, we giveadvice as follow:adjusting the method for computing stock weights, reducinggovernment intervention, maintaining the authority and scientific of index anddisclosing the index establishment method detailly.