Empirical Research On IPO Underpricing Of Investor Sentiment

Since the establishment of December 19,1990 Shanghai Stock Exchange, the stock market has gone through 26 years. Our IPO system from the initial audit system to later approval system, as well as the upcoming registration system, the degree of market IPO system also improved step by step, which contains the financial efforts of countless people. In view of the upcoming national registration system, and the accuracy of the registration system of the IPO pricing have higher requirements, improve the accuracy of our IPO pricing and regulatory agencies are not a small challenge. Therefore, this paper studies the relationship between investor sentiment and IPO underpricing, the IPO pricing mechanism to sort out the existence of IPO pricing is unreasonable to find factors affecting IPO pricing accuracy, and improve our IPO system so as to improve our Objective IPO pricing accuracy.Foreign academics for research IPO underpricing phenomenon has lasted half a century, theorists have proposed are not the same. The traditional theory is based on the secondary market underpricing validity of the hypothesis that due to the issuers, underwriters and investors faced with asymmetric information, issuers and underwriters to reduce the issue price of the stock to make way for investors "concessions", suppression It is the price investors to buy, hold shares uncertainties facing the real needs information or provide compensation made. But the traditional underpricing theory itself flawed, long-term performance for the IPO appear vulnerable and hot IPO issuance market phenomenon, we can not provide a reasonable explanation. Ritter therefore proposed research should be transferred to the IPO underpricing field of behavioral finance.Development of Foreign behavioral finance to break the shackles of traditional underpricing theory for the study of IPO underpricing provide a wider field of vision. Along with the development of behavioral finance, speculative bubble hypothesis, the hypothesis that differences of opinion, the theory of positive feedback trading, waterfall effect hypothesis theories and hypotheses are increasingly being applied to the IPO research. In contrast, domestic research on IPO underpricing has lasted 20 years, but most of the research are to verify the applicability of foreign theories in the Chinese market, as foreign financial markets and the domestic financial market in the distribution system, market efficiency, investment who has a very different structure, composition, and therefore foreign theories in the domestic market did not show a good explanatory power. On the other hand, IPO underpricing domestic IPO market is higher than the mature markets abroad, indicating that the domestic market shares by investors more enthusiastic pursuit of greater influence investor sentiment on the domestic IPO market, so domestic IPO under study the relationship between price and investor sentiment on the domestic Perfection IPO underpricing of great significance.To study the relationship between IPO and investor sentiment, we must first analyze IPO pricing mechanism. In mature markets abroad, not only has shares pricing underwriters also have the right to allocation of new shares, the performance of the IPO pricing stage, underwriters invite specific institutional investors on IPO pricing offer, then about IPO underwriters established according to the needs of major organizations offer amount and valuation of bookkeeping, the demand curve for the formation of new shares, on this basis, to finalize the issue price. The underwriters have the right to allocation of new shares, it is possible to transfer the allocation of new shares by premium income IPO underwriters institutions offer incentives can provide real quotes agency to raise its offer authenticity can effectively help underwriters more accurate IPO pricing. In contrast the domestic market, the Chinese IPO market presence of long-term high underpricing phenomenon, regulators in order to avoid the interests of underwriters inquiry body of delivery, and not the stock distribution rights to the underwriters.On the one hand, since the underwriters do not have the right to allocation of new shares, the underwriters can not be conveyed through the underpricing of interest to stimulate real quote quote agencies, reducing the accuracy of the IPO pricing. On the other hand, since there is no underwriter IPO allocation, in the face of excessive optimism and shares "short supply" situation, get pricing underwriters tend to choose the use of mood elevation issue price, by increasing the amount of financing to gain more underwriting and sponsorship fees. Issue price thus established is included in part of the emotional bubble. Due to the instability in the secondary market sentiment, emotional issue price bubble contained in, the higher the probability below the issue price listed in the early stages, while the new shares frequently break through underwriters undermine long-term accumulation of market damage to reputation its economic interests, underwriter reputation is higher, it will limit its use of emotional impulse, to implement a more conservative pricing strategy.By analyzing the pricing mechanism, we find that the underwriter because they do not have the right to allocate new shares do not have the initiative to reduce the issue price and the transfer of premium income motives. Therefore, the underwriters in order to obtain a higher commission, will choose the new shares is not guaranteed under the premise break, take advantage of investor sentiment to improve the IPO price, the IPO final issue price will be based on the level of market sentiment, including the emotional part of the foam. So ultimately affect the IPO underpricing What are the factors? By comparing the domestic and foreign market IPO underpricing factors, we found that the domestic market is mainly affected by the following factors:heterogeneous expectations, optimism bias, psychological anchor, representativeness bias. Heterogeneity is due to the expected short selling restrictions, when the IPO, negative investor is difficult to show his pessimistic view of the stock out, passive investors can only withdraw IPO market. Thus, the stock price reflects the more optimistic expectations of investors, optimistic outlook overly optimistic stock investors will directly promote the rational IPO price exceeds the price. But the completion of the IPO, to the secondary market, the absence of short selling restrictions, other investors can expect to be reflected in the price, the stock price will slowly move closer to the rational, so there have been underpricing of IPO phenomena and long-term performance of new shares relatively weak broader market phenomenon. Domestic investor optimism bias is a kind of a priori stock market optimism. Anchor psychology is that people at the time of judgment and decision-making, often setting information readily available as a reference, the final decision will be adjusted on the basis of reference. The domestic market shares on the first day underpricing phenomenon is the anchor investor psychology excess premium income, investors subscribe for new shares in accordance with the past brought IPO proceeds would have innate optimism bias, which exacerbated investors' optimism. Representative bias is the investment bank of each issue are as a product to packaging, over-promote the performance and growth of new shares in the initial issuance of new shares, investors are difficult to identify excessive packaging of such behavior will lead IPO market early demand for new shares. With the passage of time, the information disclosure of listed companies more perfect, gradually reduce information asymmetry, investors get more information, more help to make rational judgments, making the IPO price to slowly become more rational, with the result the new shares are priced high long-term vision.As in recent years, domestic new shares issued in the new system continue to evolve, so in recent years, changes in the domestic market underpricing herein considered, we find China in recent years to improve the success rate of new shares, indicating that more investors in the primary market subscription of new shares, and 14 years after the IPO underpricing rate rise, not fall, but also in the 14-year bull market in the background, resulting in investor sentiment, making the IPO market is extremely strong, resulting underpricing rate has been rising.By analyzing the IPO pricing mechanism and IPO underpricing factors, we found that investor sentiment mainly in two areas pushed up the price of the new shares, the first link, offering price link. Underwriters use to get more commission income investor sentiment initiative to improve the issue price, and by heterogeneous expectations theory, we found that IPO inquiry stage, the inquiry results can only express optimistic expectations of investors, which also pushed up the shares. The second part of the new shares trading links. Due to the presence of congenital investor optimism bias on the market for the listing of new shares will be in hot pursuit, resulting in transaction prices. In addition, due to the high market shares of the proportion of retail investors, the majority of retail investors in the issue of new shares early stage of asymmetric information, market sentiment vulnerable to blindly chase new shares, also contributed to underpricing further push. We find that not only affects investor sentiment, the transaction price of new shares in the secondary market, sentiment will bubble through underwriters priced into the final offering price, so we infer investor sentiment and IPO underpricing positive correlation. So how do you describe the premise of investor sentiment is the study of the problem, previous studies usually a single index of investor sentiment will be described, and this article through the use of principal component analysis of the selected five single indicators (both explicit indicators including invisible index) were analyzed to select a composite sentiment index to express most of the information a single indicator of the selected contains, and then determine the weight factor weight, and finally according to the weight single indicator rebuild a composite sentiment index to measure investor sentiment, which method with respect to a single index more accurately reflect investor sentiment also makes the back of the Research easier.By analyzing the IPO underpricing rate of change in recent years, we found that 14-15 listed companies underpricing rate becomes high, and by the greater impact investor sentiment. So empirical research paper chooses 2014--2015 years Mainboard-listed companies as samples from the IPO underpricing investor sentiment is the main factors for the angle of empirical research underpricing rate and found that sentiment indicators and comprehensive IPO underpricing 1 under% of cases significant, significant positive correlation between the two, indicating that investor sentiment is the main factor causing IPO underpricing, also verify the previous analysis of the IPO underpricing and factors influencing mechanism.Research ideas of this paper is to analyze the domestic IPO pricing mechanism, and then analyze the impact factors of IPO underpricing, and finally compare changes in recent years underpricing, the study reveals the progressive layers affect investor sentiment IPO underpricing. The empirical research paper chooses 14 to 15 years Board listed company data, because the 14 to 15-year transition period is registration system, at this particular time interval, IPO underpricing phenomenon has changed significantly. Therefore, we believe the impact will be different mechanism, research on underpricing rate factor for this period there will be a new discovery.