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Chinese IPO activity, pricing, and market cycles

Chinese IPO activity, pricing, and market cycles We examine the activity, pricing, and market cycles of 1,380 Chinese A share IPOs over the period 1991–2005 and find initial underpricing of 238%. The government restrictions on IPO offer price and quota allocation cause pricing structural breaks and attribute more than half of initial underpricing. A multifactor model that includes firm’s characteristics, excess demand for IPO shares, and the government restrictions explains cross-sectional initial returns, after controlling for industrial differences and stock market conditions. In addition, monthly IPO volume and average initial return are highly correlated. A VAR model indicates that initial return leads IPO volume by 6 months. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Chinese IPO activity, pricing, and market cycles

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References (47)

Publisher
Springer Journals
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
DOI
10.1007/s11156-009-0147-6
Publisher site
See Article on Publisher Site

Abstract

We examine the activity, pricing, and market cycles of 1,380 Chinese A share IPOs over the period 1991–2005 and find initial underpricing of 238%. The government restrictions on IPO offer price and quota allocation cause pricing structural breaks and attribute more than half of initial underpricing. A multifactor model that includes firm’s characteristics, excess demand for IPO shares, and the government restrictions explains cross-sectional initial returns, after controlling for industrial differences and stock market conditions. In addition, monthly IPO volume and average initial return are highly correlated. A VAR model indicates that initial return leads IPO volume by 6 months.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Sep 22, 2009

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