Analysis The Influencing Factors In Lot Rate Of A-share IPO Market

Since the establishment of the Shanghai Stock Exchange and the Shenzhen Stock Exchange in the early20th century, the IPO market has experienced20years. In the development process of the IPO market, some problems, such as high underpricing problems, reflecting the world’s IPO common characteristics and the problems reflecting the Chinese characteristics appeared. Taken together, these problems could be summarized as three types of financial vision:the hot IPO market, the high abnormal return and the long time poor performance of the IPO. In these three financial visions, the hot IPO market is the start point. There is strong need to study and research the hot IPO market. On the one hand, in the IPO market, the enthusiasm of the investors is continuing high. During the2002and the2012, the1321IPOs using the market value allotment and the off-line enquiry online pricing have very low lot winning rate, which is0.999. This figure is far higher than other countries in the corresponding lot winning rate. On the other hand, there are various studies to explain the high abnormal excess return, such as the IPO market underpricing theories, the secondary market premium theory, the asymmetric information theory (including the asymmetric information problem between underwriters and issuers, the asymmetric information problem between investors and issuers and the asymmetric information between the investors and underwriters) and the study of behavioral finance on investor psychology.Currently, dividing the investors to individual investors and institutional investors is a popular practice. Comparing the difference in behaviors between the individual investors and the institutional investors, it is possible to study the high abnormal return and the long-term poor performance of the IPO market. However, there are few studies about the hot IPO market. The existing research is usually empirical analysis on the factors affecting the lot winning rate, which is only beneficial for the investors who want to improve the lot winning rate. Therefore, this paper attempts to study factors affecting the lot winning rate of the IPO market based on the difference of the individual investors and the institutional investors, which could infer the different factors affecting the individual investors and the institutional investors and could propose the suggestions.In the paper, the overall writing ideas are below. Firstly, we assume that the level of the lot winning rate could reflect the attitude and enthusiasm of the investors. The low lot winning rate of the IPO reflects that the investors prefer this IPO. Further, this paper divided the investors into the institutional investors and the individual investors based on the different issuance manners. In the issuance manner of the market cap placement, the individual investors are the main participants.In the issuance manner of the inquiry under the net internet pricing, the institutional investors are the main participants.Secondly, after dividing the individual investors and the institutional investors, this paper studies the different factors influencing the individual investors’and the institutional investors’behaviors. Considering the other literatures and the investor sentiment theory and the asymmetric information theory, individual investors tend to be more vulnerable to the investor sentiment, they tend to form some fixed inertia of thinking and innate ideas.In the IPO market, individual investors tend to adhere on the "IPO undefeated" logic. In the meantime, the institutional investors would be more rational. We could see this theory analysis on the lot winning rate. Hypothesis1is that there exists a significant positive linear correlation between the lot winning rate of the individual investors and the IPO number.In the meantime, there is no significant linear correlation between the lot winning rate of the institutional investors and the IPO number. Hypothesis2is that the lot winning rate of the institutional investors exist a significant positive correlation between the IPO price, and negative correlation between the tpremium, and negative correlation between pe. In the meantime, there is no significant correlation between the lot winning rate and these variables. Hypothesis3is that the lot winning rate of the institutional investors exist significant negative correlation between the underwriter reputations. In the meantime, there is no significant correlation between the lot winning rate of the individual investors.Again, in order to verify these three hypotheses, this paper uses the cross-sectional data regression. The overall idea is that selecting the subscription of IPOs during the May29,2002to October26,2012as simple which includes 936IPOs. The202IPOs in the issuance manner of the market cap placement are named sample1; the734IPOs in the issuance manner of the inquiry under the net and internet pricing are named sample2. Then this paper introduces lot as the explained variable and issuenumber, issueprice, pe, roe, tpremium and reputation as explaining variables. With the help of the stepwise regression and heteroscedasticity adjustments in sample1and sample2, we could see there is a significant linear regression between the lot winning rate of the individual investors and the issuenumber and the coefficient of determination reached to0.9993. Adding other explaining variables could not improve the coefficient of determination and the coefficients of the explaining variables are not significant. There is no significant correlation between the lot winning rate of the individual investors and the reputation. Adding the D*reputation could not make the correlation significant. This means that the sponsor representative system could not effectively improve the relation between the lot winning rate of the individual investors and the reputation. In sample2, there is no significant linear correlation between the lot winning rate of institutional investors and the issuenumber. However, adding the issueprice, tpremium, pe, roe, reputation, the coefficients of the explaining variables are significant. The coefficient of determination continuous to be bigger. Adding the D "reputation, the coefficient of the explaining variable is not significant. Then the hypothesis1, hypothesis2and hypothesis3are proved.It is can be concluded that in the IPO market the individual investors would invest the IPOs without considering the factors. Each IPO is the same to invest for the individual investors. In the meantime, the institutional investors would consider the issueprice, pe, roe, tpremium, reputation and the other factors when they buy the IPO. In a word, the institutional investors would be more rational than the individual investors.In the last, this paper proposed three possible policy recommendations. The first one is the possible IPO distribution system. The second one is the possible IPO intermediary regulatory idea. The third one is that a possible market economic philosophy.