Study On The Effect Of Investor Sentiment And Analyst Attention On IPO Underpricing In China

IPO underpricing refers to the closing price of new shares listed on the first day was obviously higher than that of initial public offering,wh ich leads to its debut stock yields significantly higher than the market average yield.Since the beginning of establishment,China's stock market has been plagued by IPO underpricing problems,the government regulators have introduced a series processes of the IPO price reform for the high underpricing phenomenon,IPO inquiry from the audit system to market system,but the problem of IPO underpricing in China is still very prominent.On the one hand,as the emerging capital market,the individual investor of China's stock market occupies the main position and the irrational characteristics of its behavior are prominent.At the same time,China's stock market lack of short mechanism before 2010,even institutional investors saw the IPO first-day price deviation,they also could't be eliminated by arbitrage to price deviation,so irrational investors behavior ha d a decisive influence on IPO pricing.On the other hand,securities analyst,through the professional knowledge of finance and industry training,with the advantages of information channels,helps to reduce the information asymmetry,so as to decrease the cost of equity capital,promote the rational allocation of resources in capital market.Based on the theory of behavioral finance and the information s upply and institutional changes of analysts,thepaper investigates the problem of the IPO underpricing in China.The article uses all rhe stock exchange listing of IPO companies,from 2006 to 2015,in Shanghai,China,shenzhen as the research sample,using factor analysis,correlation analysis,multiple regression and other methods to study the influence of the investor sentiment,analysts follow up,analysts predict price differences and accuracy on the IPO underpricing in China,further,the paper observed the influence of Chinese IPO regulatory regime change on IPO underpricing from 2009 to 2014.The paper finds that investor sentiment is positively correlated with IPO underpricing,and with the improvement of the number of analysts,investor sentiment and IPO price suppression rate are further increasing.However,the lower the accuracy of analyst forecasts,the higher the divergence,the higher the IPO underpricing rate,and the "winner curse" has existed in the China's stock market.Meanwhile,the lower the divergence of the forecast price,the lower the degree of information asymmetry,the positive relationship between investor sentiment and the company's IPO underpricing becomes stronger.In the wake of the market-oriented inquiry system in China,the IPO underpricing rate has decreased significantly,and the positive relationship between investor sentiment and IPO has been reduced.The policy implications of this study are strengthening investors' rational investment in education,introducing market-oriented inquiry and reducing information asymmetry to improve IPO pricing efficiency and optimize resource allocation efficiency.Analysts as a bridge of the capital market information,the higher the accuracy of forecasting price,the lower the degree of d isagreement,the lower the IPO underpricing,indicating that strengthening information disclosure,reducing the information asymmetry will help investors to proceed the rational investment,thus reducing the rate of IPO underpricing in China's stock market.