The Impact Of IPO On The Secondary Stock Market

The relationship between the IPO market and the secondary stock market is complementary and mutually influenced. The healthy and ideal level of the market can provide high quality listing corporation for the secondary stock market which can ensure the health of the stock market from the source. However, in fact, the secondary stock market now widely criticized with many problems from the primary market. The analysis of the mechanism for the impact of IPO stock in the secondary market in this paper mainly from three aspects: IPO raised diversion of funds from the secondary stock market; the impact of IPO stock on the secondary market; IPO can bring fresh blood for the secondary stock market.Based on theoretical analysis, this paper establishes the VAR model and Grainger causality test and impulse response function to analyze the impact of IPO on the secondary stock market. In the final empirical part, this paper verifies the impact of IPO on secondary stock market which is correct mechanism through the descriptive statistics and VAR model. The effect of the diversion of funds caused by the IPO has negative influence on the secondary stock market which validating the IPO and the index have a one-way and negative relationship. At the same time in the bull market stage, IPO will have a short-term negative relationship and a long-term positive relationship impact on the Shanghai Composite Index. The rises in Shanghai Composite Index will have a positive impact on IPO. In the bear market stage, IPO will not have an impact on the secondary stock market and the reason for this is that investor sentiment greatly affected by market conditions and regulatory authorities in order to maintain the stability of the stock in the secondary market which may limit IPO. Finally, to further study the quantitative impact of IPO on the secondary stock market this paper chooses the multivariate linear model and uses OLS regression. The results show that in either a buyer’s market or a seller’s market, IPO has a significant negative impact on the return of the Shanghai Composite Index.