Empirical Study On The Correlation Between Investor Irrationality And IPO Underpricing

IPO underpricing,the stock's closing price is much higher than the issue price.According to the effective market hypothesis,the competition of the investors can make the stock price and the stock intrinsic value become the competition market equilibrium.So the first day there is no stock price problem.Unfortunately,in the actual stock market,IPO underpricing is the most common phenomenon.Previous studies suggest that investor irrationality is an important cause of formation of IPO underpricing,we want to test this theory.Main purpose is that conclusion is true or not which is based on different developed degree of the stock markets and on three different periods(rise period,fall period,consolidation period).Using multiple linear regression models,examine the impact of investor irrationality of IPO underpricing.We use asset-liability ratio,per share profit and price/earnings ratio and other indicators to measure enterprise class of stock value,which constitutes a rational factor in the market.The exchange rate and success rate of the two indicators to measure investor's cognitive biases,Systematic pricing bias arising out of such as mood swings,These indicators represent a market of non-rational factors.Investors in different periods of non-rational factors in strong correlation with the IPO underpricing,Representatives of enterprises and the market value of a rational factor and correlation of IPO underpricing is weak,This indicates that in the period of irrational investors is an important cause of IPO underpricing.Through empirical analysis shows that,whether it's Korea or China,non-rational investors is an important cause of IPO underpricing,which illustrates investors ' irrational effect IPO underpricing conclusion has nothing to do with the level of development of the capital market.