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Research on the Impact of Investor Sentiment on IPO Underpricing of GEM

Author

Listed:
  • Heliang Zhu
  • Xinyu Cai
  • Ling Liu
  • Ziqi Liu
  • Huilu
  • Jiang

Abstract

IPO underpricing appears when its closing price far exceeds issuance price on the first day of stock issuance, which is a common phenomenon all over the world. This paper first expounds the related concepts of investor sentiment and IPO underpricing, and then introduces the two perspectives of behavioral finance. Based on these two perspectives, this paper expounds the impact path of investor sentiment on IPO underpricing. Combined with the characteristics of investor sentiment, the proxy indicators of the composite indicators are selected, and the comprehensive indicators of investor sentiment are obtained by using the principal component analysis method, which are combined with the financial indicators that can reflect the market conditions. Taking the data of GEM stocks issued from January 2015 to December 2021 as the research sample, SPSS is used for stepwise regression analysis. From the results of the empirical research, there is a positive correlation between investor sentiment and IPO underpricing. Finally, this paper puts forward suggestions from two aspects: first, we should give correct and reasonable guidance to investors, and implement access policies; Second, in terms of macro policies, we should strengthen the audit of listed companies, establish an authoritative information disclosure mechanism, and put the expansion of GEM on the agenda. Â JEL classification numbers: G14.

Suggested Citation

  • Heliang Zhu & Xinyu Cai & Ling Liu & Ziqi Liu & Huilu & Jiang, 2024. "Research on the Impact of Investor Sentiment on IPO Underpricing of GEM," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 14(5), pages 1-10.
    • Handle: RePEc:spt:admaec:v:14:y:2024:i:5:f:14_5_10
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    References listed on IDEAS

    as
    1. Gaofeng Zou & Qiyuan Cheng & Weijie Chen & J. Ginger Meng, 2020. "What causes the IPO underpricing? New evidence from China’s SME market," Applied Economics, Taylor & Francis Journals, vol. 52(23), pages 2493-2507, May.
    2. Malcolm Baker & Jeffrey Wurgler, 2006. "Investor Sentiment and the Cross‐Section of Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1645-1680, August.
    3. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    4. Shleifer, Andrei & Vishny, Robert W, 1997. "The Limits of Arbitrage," Journal of Finance, American Finance Association, vol. 52(1), pages 35-55, March.
    5. Brown, Gregory W. & Cliff, Michael T., 2004. "Investor sentiment and the near-term stock market," Journal of Empirical Finance, Elsevier, vol. 11(1), pages 1-27, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    GEM; Investor sentiment; IPO underpricing; Behavioral finance.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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