Irrational Behavior Of Investors Study On IPO Underpricing Of GEM Based On Behavioral Finance

The problem of initial public offerings has been much academic attention, IPO underpricing enduring mystery is a hot topic in the financial sector.IPO underpricing refers to the shares after the offering price listed below the first-day closing price, investors can obtain excess returns subscribe for new shares as a stock market operating conditions. Compared with developed securities markets, China’s IPO underpricing degree is higher, especially our country’s GEM launched soon there is a more serious phenomenon of IPO underpricing, this will inevitably lead to a lot of money chasing the accumulation in a risk-free income market, the irrational allocation of resources; Higher secondary market prices also easy to cause the stock market volatility, high low risk, is not conducive to the healthy development of the GEM in our country.For a long time, the understanding of the IPO underpricing is mainly focused on the primary market the IPO pricing too low and the secondary market on the first day closing price is too high. Classic study IPO underpricing in the theory and method is based on "rational man hypothesis", carried out under the traditional finance theory and framework. Behavioral finance IPO for research provides a new platform, from the theoretical and empirical aspects are provides a new perspective. Behavioral finance thinks, first-day underpricing of the market is not strong and effective, but half strong type, or invalid, some limited rational or irrational investors will produce some irrational behavior, thereby affect the first-day closing price, to produce the underpricing. To the problem of IPO underpricing in China early scholars think:strict distribution control system and non-market public offerings IPO pricing at the launch of the bond is too low, causing the high IPO underpricing phenomenon in our country. However, after the IPO regulatory mode and distribution pricing mode for many times, after the reform in our country high IPO underpricing phenomenon is still as usual. IPO inquiry system’s implementation, although to a certain extent, improve the high IPO underpricing phenomenon, but did not eliminate the phenomenon of IPO underpricing, which indicates that IPO underpricing in China exists a lot of defects in the past research. Some domestic scholars have also been verified by different ways in China securities market pricing of new shares have the rationality, the low level of market pricing of new shares is not the real source of the GEM high IPO underpricing. Therefore, this article broke through the traditional financial theory research framework, from the perspective of behavioral finance science, to study the irrational behavior of investors affect the GEM IPO underpricing.This article follows the "literature review-theoretical analysis-model building-empirical testing-policy recommendations" of the technical route. First of all, literature analysis method to discuss foreign scholars explain on the phenomenon of IPO underpricing, combing summing up the applicability of western theory of IPO underpricing in China’s market and domestic relevant theories of IPO underpricing. Secondly, using the method of theoretical deduction, the irrational behavior of investors from the perspective of behavioral finance theory’s influence on the GEM IPO underpricing, and on the basis of theoretical analysis introduce into four metrics which reflect irrational behavior of investors, then propose and study this paper’s hypothesis. Thirdly, to October30,2009since the creation of the GEM to December31,2012in China companies listed on GEM as research samples, a linear regression model to test the relationship between investor irrationality measure and IPO underpricing. Finally, on the basis of the inspection results inductive conclusions, and put forward the corresponding policy recommendations.In this paper, research shows that our country the GEM IPO underpricing rate is higher, investors’ irrational behavior has a significant influence on the GEM IPO underpricing. Investors’ irrational behavior performance of the GEM IPO underpricing mainly include the speculative and excessive trading, over-reaction and reaction, and herd behavior. This paper used BM, TurnOver, Lag, LotRate of these four indicators to measure the GEM market investor speculation, excessive trading, excessive response and inadequate response, herd behavior, and study irrational behavior of investors in the four metrics effect on GEM IPO underpricing.Therefore, based on theoretical and empirical research and analysis, this paper argues, in order to reduce our GEM IPO underpricing, we must promote the GEM market norms and mature, the construction of a suitable investment environment; Improve the inquiry mechanism to promote the release of further market-oriented pricing mechanism, so that a market GEM IPO issue price is more reasonable and effective; speed up the GEM scale, improve their vitality, meet the mainland many innovative companies financing needs and the secondary market investor’s investment demand, effectively restrain the hype, the GEM evaluation value regression rational; Regulators should strengthen the supervision of the GEM and investors, make the GEM operation specification, investors rational investment, participate in the growth enterprise market Is more important is that investors must strengthen self education, constantly improve their own quality, investment experience, forms the value investment idea, rational investment.