Investors Behavior And GEM IPO Underpricing In China

IPO underpricing refers to the company whose shares’ closing price in the first-day is much higher than its issuing price. There are many domestic and foreign researches on this issue. Foreign scholars, after years of research, put forward some theories. For example,"the winner’s curse" theory, signaling theory, etc. Domestic scholars focus more on empirical level. Some of them use foreign theories to explain China’s present situation, while others base on the Chinese characteristics, hoping to find out the main factors that influence the IPO underpricing. This article is based on relevent theories of Behavioral Finance, try to analysis the factors influecing the IPO underpricing of China’s GEM from the perspective of investors behavior.Firstly, this article introduces the basic information about the GEM and the current situation of IPO being underpriced. Then, with the stochastic frontier approach, it makes an empirical analysis on main sources of IPO underpricing. Subsequently, this article analyses investors behavior with theories of Behavioral Finance, and proposes some relevant hypothesis. Basing on them, it establishes a multiple linear regression model using the related data of CSMAR. The empirical result indicates that investors behavior is the main factor influencing China’s IPO underpricing in the GEM.In order to decrease IPO underpricing rate, this article brings forward some p olicy suggestions basing on the empirical result above-mentioned. For example, tra ining rational investors; improving IPO inquiring system; scaling up the GEM and so on.Although this article analyses the factors influencing IPO underpricing, it rest s some deficiencies. For instance, it focus on static analysis instead of dynamic ana lysis, still,it does not analyses the behavior of issuers and underwriters. Therefore, using both static and dynamic analysis is the key research direction in this field.