Study On The Anchoring Effect Of IPO Underworld

The high IPO underpricing is a unique feature of the capital market, which is more obvious in China. Because the underpricing problems are not consistent with the efficient market theory, it was known as "the underpricing mystery" which seems to be simple, but always a myth. What are the true reasons for the IPO underpricing happening in China? Affected by what? How to eliminate it? Based on the international research of the IPO underpricing theory and methodology, many of domestic scholars have some related researches on the deviation of the primary market and the investor sentiment of the secondary market, respectively. However, there are few breakthroughs. With the introduction and the promotion of behavioral financal research, domestic investors have been confirmed with "overconfidence","herd behavior" and "anchoring effect" characteristics. With the use of the "anchoring effect" theory in psychology, this paper studies on IPO underpricing phenomenon,This study adopts both of the methods of theoretical studies and empirical research. The results from a sample of281firms listed in the GEM capital market show that:(1) the underpricing ratios are made up irrationally by the investors.There exists significant "anchoring and adjustment" biases. The investors mainly use two anchors, the static anchor-the average underpricing ratio of all firms listed in the previous month, and the moving anchor-the average ratio of the last firms listed.(2) The underpricing ratios are more affected by the moving anchor than the static anchor, which means the anchoring effect is weaker as time goes.(3) The paper proves the underpricing ratio have closely relationship with other variables such as turnover which is consistent with the past research.