An Empirical Analysis Of China 's IPO Underpricing Based On Independent Discount And Premium

There is a high IPO under-pricing rate on China GEM since its open on Oct.302009. As China GEM has low pricing efficiency and extreme under-supply of offerings, the classic definition of IPO under-pricing is challenged when it is applied, which should be re-defined based on "rational market value". The under-pricing on primary market and the over-pricing on secondary market that together make up the IPO under-pricing on China GEM is independent of each other’s impacting factors. Empirical researches indicate that the over-pricing on secondary market can be well explained by the factor of investor sentiment and high-quality listed companies tend to cut down its offering price thus to show its difference with the low-quality.