Institution Investor Sentiment, Market Investor Sentiment With IPO Underpricing And Long-term Return

Since the1970s, the IPO(Initial Public Offering)market have caused three visions:the hot market, IPO underpricing, long-term gains to weaken began gradually came into the line of sight of the scholars, and attracted attentions of domestic scholars in the nearly decade. The IPO underpricing means that market price of IPO is much higher than the issue price. The huge spread of them leading to the IPO higher excess yield. IPO long-term gains to weaken means that the return of shares of IPOs would be less than the overall market in3-5years.China’s IPO underpricing phenomenon is much higher than the Western developed countries, so it’s not appropriate to use their theories to explain our phenomenon. This is due to many reasons like easily affected by noise and so on.The prevalence of behavioral finance provides a new perspective to our study. The introduction of investor sentiment brings us new explanation of IPO underpricing. This theory believes that investors will make decisions with certain characteristics, such as the herd mentality and systematic bias in the face of a rapidly changing economic market and unknown changes. Investors are not completely rational, but vulnerable to the emotional impact.This article considers IPO underpricing and long-term gains to weaken from the point of investor sentiment. In this article, we divided sentiment into market sentiment and institutional investor sentiment. And thus asked the following questions:whether the market investor sentiment, institutional investor sentiment impact on IPO underpricing? Whether the market investor sentiment, institutional investor sentiment impact on long-term gains? How much impact are they? This paper focuses on these issues research.In this paper, we use principal component analysis, as well as correlation, regression analysis and variable grouping. As to the selection of data, in order to minimize the impact of the split share structure reform, we use the data from2006to2011, exclude financial enterprises, enterprises that have incomplete data, with a total of499sample. With using empirical analysis, we eventually found that IPO underpricing have a significant positive correlation with the market investor sentiment and institutional investor sentiment. IPO underpricing, investor sentiment was significantly negatively correlated with interim income after listing(1-2years), but not the third year.