Nothing Special   »   [go: up one dir, main page]
Skip to main content
Springer Nature Link
Log in

Investors’ attention and overpricing of IPO: an empirical study on China’s growth enterprise market

  • Original Article
  • Published:
Information Systems and e-Business Management Aims and scope Submit manuscript

Abstract

In China, the Growth Enterprise Market (GEM) is a brand new market that provides an additional way of financing for firms with good growth potential. Whereas there has been a massive amount of stocks breaking on the first trading day since 2010, the risk of IPO’s overpricing in China’s GEM has drawn more and more attention in recent years. Based on the theory of behavioral finance and limited attention, investors’ attention may be a quite indicative determinant to the IPO overpricing. Accordingly, we collected data from Internet including online stock forums and search engines, then built multiple investors’ attention metrics that were distinct to the traditional metrics from the offline stock market. In the empirical study, we built regression models to dig out the determinants of IPO’s overpricing and found that the hybrid model containing both online metrics and financial metrics outperformed the others considerably. The adjusted R-square of the hybrid model containing both online metrics and financial metrics is as high as 82.8%, in contrast to 18.2% for the model containing only the financial metrics and 59.3% for that containing only investors’ attention.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Subscribe and save

Springer+ Basic
$34.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or eBook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. http://guba.eastmoney.com.

References

  • Aggarwal RK, Krigman L, Womack KL (2002) Strategic IPO underpricing, Information momentum, and lockup expiration selling. J Financ Econ 66(1):105–137

    Article  Google Scholar 

  • Antweiler W, Frank MZ (2004) Is all that talk just noise? The information content of Internet stock message boards. J Financ 59(3):1259–1294

    Article  Google Scholar 

  • Black F (1986) Noise. J Financ 41(3):529–543

    Article  Google Scholar 

  • Cogliati GM, Paleari S, Vismara S (2011) IPO pricing: growth rates implied in offer prices. Ann Financ 7(1):53–82

    Article  Google Scholar 

  • Da Z, Engelberg J, Gao P (2011) In search of attention. J Financ 6(5):1461–1499

    Article  Google Scholar 

  • De Long JB, Shleifer A, Summers LH, Waldmann RJ (1990) Noise trader risk in financial markets. J Politi Econ 98(4):703–738

    Article  Google Scholar 

  • DellaVigna S (2007) Psychology and economics: evidence from the field. J Econ Lit 47(2):315–372

    Article  Google Scholar 

  • Dimpfl T, Jank S (2016) Can Internet Search Queries Help to Predict Stock Market Volatility? Eur Financ Manag 22(2):171–192

    Google Scholar 

  • Engelberg J, Sasseville C, Williams J (2012) Market madness? The case of mad money. Manage Sci 58(2):351–364

    Article  Google Scholar 

  • Fama EF (1970) Efficient capital markets: a review of theory and empirical work. J Financ 25(2):383–417

    Article  Google Scholar 

  • Gao Yan (2010) What comprises IPO initial returns:Evidence from the Chinese market. Pacific-Basin Finance J 18(1):77–89

  • Hsee CK, Yu F, Zhang J, Zhang Y (2003) Medium maximization. J Consum Res 30(1):1–14

    Article  Google Scholar 

  • Husnan S, Hanafi MM, Munandar M (2014) Price stabilization and IPO underpricing: an empirical study in the Indonesian stock exchange. J Indones Econ Bus: JIEB 29(2):129

    Google Scholar 

  • Ibbotson RG (1975) Price performance of common stock new issues. J Financ Econ 2(3):235–272

    Article  Google Scholar 

  • Kahneman D (1973) Attention and effort. Prentice-Hall, Englewood Cliffs, p 246

    Google Scholar 

  • Kim M, Ritter JR (1999) Valuing IPOs. J Financ Econ 53(3):409–437

    Article  Google Scholar 

  • Lintner G (1998) Behavioral finance: why investors make bad decisions. Plan. 13(1):7–8

    Google Scholar 

  • Thaler RH (ed) (2005) Advances in behavioral finance, vol 2. Princeton University Press

  • Vlastakis N, Markellos RN (2012) Information demand and stock market volatility. J Bank Financ 36(6):1808–1821

    Article  Google Scholar 

  • Wysocki PD (1998) Cheap talk on the web: the determinants of postings on stock message boards. University of michigan business school working paper (98025)

  • Zhou Z, Zhou J (2010) Chinese IPO activity, pricing, and market cycles. Rev Quant Financ Account 34(4):483–503

    Article  Google Scholar 

Download references

Acknowledgements

This work was supported partly by the National Science Foundation of China (NSFC No. 71601106) and Shanghai Science & Technology Innovation Project (No. 16511102900).

Author information

Author notes

    Authors and Affiliations

    1. School of Information Management and Engineering, Shanghai University of Finance and Economics, Shanghai, 200433, China

      Hailiang Huang, Yanhong Li & Yingying Zhang

    2. Shanghai Key Laboratory of Financial Information Technology, Shanghai, 200433, China

      Hailiang Huang, Yanhong Li & Yingying Zhang

    Authors
    1. Hailiang Huang
      View author publications

      You can also search for this author in PubMed Google Scholar

    2. Yanhong Li
      View author publications

      You can also search for this author in PubMed Google Scholar

    3. Yingying Zhang
      View author publications

      You can also search for this author in PubMed Google Scholar

    Corresponding author

    Correspondence to Yingying Zhang.

    Additional information

    Hailiang Huang, Yanhong Li and Yingying Zhang made equal contribution to this paper.

    Appendix

    Appendix

    See Table 10.

    Table 10 Correlation coefficient matrix
    Full size table

    Rights and permissions

    Reprints and permissions

    About this article

    Check for updates. Verify currency and authenticity via CrossMark

    Cite this article

    Huang, H., Li, Y. & Zhang, Y. Investors’ attention and overpricing of IPO: an empirical study on China’s growth enterprise market. Inf Syst E-Bus Manage 16, 761–774 (2018). https://doi.org/10.1007/s10257-017-0351-1

    Download citation

    • Received:

    • Revised:

    • Accepted:

    • Published:

    • Issue Date:

    • DOI: https://doi.org/10.1007/s10257-017-0351-1

    Keywords

    Search

    Navigation