Empirical Research Over The First Day Of IPO Proceeds Based On BAPM

As the core of the traditional financial theory, the capital asset pricing model (CAPM) provides scientific, standardized, rigorous theoretical research system for the asset pricing research. It is based on theory of the efficient market hypothesis (EMH). It considers that non-rational investors will not affect the price of the asset. But then CAPM has been more and more questioned for the unusual phenomenon of finance.In order to explain the phenomenon of financial markets, scholars have tried to use behavioral financial theory to expand the research. Behavioral asset pricing model (BAPM) is representative of empirical study of the behavioral financial theory, which takes into account the impact of noise traders. Investors will no longer be assumed to be rational person. The theory reveals the reality that most investors have perceptions mistakes. Therefore, the β of BAPM is more effective than the β of CAPM on explaining the behavior of the stock market.All along, the excess return of IPO in the first day is the "mystery "of traditional financial theory. Previous studies explain this phenomenon in an effective market, but the abnormal returns of IPO in first day and long-term underperformance makes this interpretation not a good solution. The researchers began to attempt to explain the behavior of investors with behavioral finance theory. They found the irrational behavior of investors had a significant effect on the stock price. In Chinese stock market, small and medium investors account for a significant proportion, which makes the cognitive biases and irrational behavior of small investors more prominent impact on the stock price. In addition, the IPO market has been in short supply. High issue price of new shares, the high PE and high capital——three high phenomena also induces researchers to explore the IPO market from the perspective of behavioral finance.At the perspective of behavioral finance, this essay will introduce the behavioral asset pricing model (BAPM) into Chinese IPO market, using empirical methods to explain the excess returns on the first day of IPO. First, it introduced the theory of the excess returns of IPO on first day and behavioral financial theory, and the traditional capital asset pricing model (CAPM) and the behavior of the capital asset pricing model (BAPM) in detail. In empirical terms, this essay selected100IPO companies on A share market from June1,2009to November30,2012as samples. It first constructs Momentum Index (DVI), then compares the β of BAPM and the of CAPM and measures noise trader risk value (NTR).After all the analysis and test, we find that the "noise" and noise trading is general in Chinese A-share IPO market. To a certain extent, it affected the normal access to investment income, led to the yield phenomenon of the first day. By comparison, the behavioralpcan better explain stock returns than traditional β.From another point, as the situation of Chinese IPO market constantly changing and improving, BAPM is more suitable and effective than CAPM.