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How Did the Elimination of the Window Guidance Policy Affect IPO Performance in China? A Stochastic Dominance Analysis

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  • Haifeng Guo
  • Yuanjing Ge
  • Chuan-Hao Hsu
  • Hung-Gay Fung

Abstract

This study uses data on all initial public offerings (IPO) listed on the three boards in China’s stock markets to investigate overpricing in the Chinese IPO market from 2009 to 2013, which was the only period during which the “window guidance” policy was suspended in China. We use stochastic dominance tests to compare IPO performance to that of corresponding market indexes and to test whether the policy change addresses earlier problems of underpricing. The results indicate that the Chinese IPO market is extremely overpriced, and on average IPOs perform worse than the secondary market, which implies that investors who invest in newly listed IPOs have a higher likelihood of losing money than they would by investing in the secondary market.

Suggested Citation

  • Haifeng Guo & Yuanjing Ge & Chuan-Hao Hsu & Hung-Gay Fung, 2021. "How Did the Elimination of the Window Guidance Policy Affect IPO Performance in China? A Stochastic Dominance Analysis," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(3), pages 824-838, February.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:3:p:824-838
    DOI: 10.1080/1540496X.2019.1600504
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    Cited by:

    1. Francesco Cesarone & Raffaello Cesetti & Giuseppe Orlando & Manuel Luis Martino & Jacopo Maria Ricci, 2022. "Comparing SSD-Efficient Portfolios with a Skewed Reference Distribution," Mathematics, MDPI, vol. 11(1), pages 1-20, December.
    2. Zhao, Yi & Wang, Nan & Zhang, Luyang & Sun, Baiqing & Yang, Yuchen, 2022. "The greater the investor attention, the better the post-IPO performance? A view of pre-IPO and post-IPO investor attention," Research in International Business and Finance, Elsevier, vol. 63(C).

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