The pricing of first day opening price returns for ChiNext IPOs
Tóm tắt
We study the listing day opening price return and compare it with the closing price return for ChiNext IPOs after the China Securities Regulatory Commission (CSRC) adopted a new “Chinese-style” bookbuilding process. We start from a traditional OLS model by screening a set of potential variables, characterized in the existing literature. Through a variable reduction process, we identify 7 significant variables for each of the return series. We further utilize a GARCH-M model with an ARMA(1,1) adjustment in the residuals to correct possible autocorrelation in the returns and cross-correlation between the return and its conditional variance to improve the model. We find that the opening price synthesizes the overall market demand for new shares from institutional and individual investors as the subscription ratios from both sectors are highly significant (oversubscriptions). In addition, the market condition over the past 21 trading days prior to listing a ChiNext IPO (market momentum), offer size (size effect), and conditional return variance (asymmetric information) are also significant. We find similar significant variables that affect the closing price return except the subscription ratio from individual investors. Overall, the opening price return contains valuable information to predict the closing price return.
Tài liệu tham khảo
Aggarwal R, Prabhala NR, Puri M (2002) Institutional allocation in initial public offerings: empirical evidence. J Finance 57:1421–1442
Baron DP (1982) A model of the demand for investment banking advising and distribution services for new issues. J Finance 37:955–976
Barry CB, Jennings RH (1993) The opening price performance of initial public offerings of common stock. Financ Manag 22:54–63
Beatty RP, Ritter JR (1986) Investment banking, reputation, and the underpricing of initial public offerings. J Financ Econ 15:213–232
Beatty RP, Welch I (1996) Issuer expenses and legal liability in initial public offerings. J Law Econ 39:545–602
Bollerslev TP (1986) Generalized autoregressive conditional heteroskedasticity. J Econom 31:307–327
Booth JR, Chua L (1996) Ownership dispersion, costly information, and IPO underpricing. J Financ Econ 41:291–310
Box G, Jenkins G (1976) Time series analysis: Forecasting and control, 2nd edn. Holden-Day, San Francisco
Brennan MJ, Franks J (1997) Underpricing, ownership and control in initial public offerings of equity securities in the UK. J Financ Econ 45:391–413
Carter RB, Manaster S (1990) Initial public offering and underwriter reputation. J Finance 45:1045–1067
Carter RB, Dark FH, Singh AK (1998) Underwriter reputation, initial returns, and the long-run performance of IPO stocks. J Finance 53:285–311
Chang EC, Luo Y, Ren J (2013) Cross-listing and pricing efficiency: the informational and anchoring role played by the reference price. J Bank Finance 37:4449–4464
Chi J, Padgett C (2005) The performance and long-run characteristics of the Chinese IPO market. Pac Econ Rev 10:451–469
Cliff MT, Denis DJ (2004) Do IPO firms purchase analyst coverage with underpricing? J Finance 59:2871–2901
Cornelli F, Goldreich D (2001) Bookbuilding and strategic allocation. J Finance 56:2337–2369
Deng H, Dorfleitner G (2008) Underpricing in Chinese IPOs—some recent evidence. Appl Financ Econ 18:9–22
Deng Q, Zhou Z (2014) Offline oversubscription, issue size, and market momentum: the driving forces for ChiNext IPOs’ initial underpricing. Chin Econ (Forthcoming)
Dunbar CG (2000) Factors affecting investment bank initial public offering market share. J Financ Econ 55:3–41
Gao F, Siddiqi MA (2012) The Rationale for IPO lockup agreements: agency or signaling? Rev Pac Basin Financ Mark Polic 15:1250013-1–1250013-18
Groenewold N, Wu Y, Tang SH, Fan XM (2004) The Chinese stock market: efficiency, predictability and profitability. Edward Elgar, Cheltenham
Gu AYX (2003) State ownership, firm size, and IPO performance: evidence from Chinese “A” share issues. Am Bus Rev 21:101–108
Guo H, Brooks R (2008) Underpricing of Chinese A-share IPOs and short-run underperformance under the approval system from 2001 to 2005. Int Rev Financ Anal 17:984–997
Guo H, Brooks R, Fung H (2011) Underpricing of Chinese initial public offerings. Chin Econ 44:72–85
Habib M, Ljungqvist A (2001) Underpricing and entrepreneurial wealth losses in IPOs: theory and evidence. Rev Financ Stud 14:433–458
Hanley KW, William J, Wilhelm WJ Jr (1995) Evidence on the strategic allocation of initial public offerings. J Financ Econ 37:239–257
Hussein M, Zhou Z (2014) The initial return and return variability: evidence from the Chinese IPO market. Rev Pac Basin Financ Mark Polic 17:1450022-1–1450022-32
Ibbotson RG (1975) Price performance of common stock new issues. J Financ Econ 2:235–272
James C, Wier P (1990) Borrowing relationships, intermediation and the cost of issuing public securities. J Financ Econ 28:149–171
Krigman L, Shaw WH, Womack KL (2001) Why do firms switch underwriters? J Financ Econ 60:245–284
Li L, Fowler J, Naughton T (2008) Short term equity returns of Chinese IPOs, 1999 to 2004: excess demand, social policy and wealth effects. J Emerg Mark Finance 7:197–214
Ljungqvist A, Wilhelm WJ (2003) IPO pricing in the dot-com bubble. J Finance 58:723–752
Logue DE (1973) On the pricing of unseasoned equity issues: 1965–1969. J Financ Quant Anal 8:91–103
Loughran T, Ritter JR (2004) Why has IPO underpricing changed over time? Financ Manag 33:5–37
Loughran T, Ritter JR, Rydqvist K (1994) Initial public offerings: international insights. Pac Basin Finance J 2:165–199
Lowry M, Officer MS, Schwert GW (2010) The variability of IPO initial returns. J Finance 65:425–465
Mello AS, Parsons JE (1998) Going public and the ownership structure of the firm. J Financ Econ 49:79–109
Michaely R, Shaw W (1994) The pricing of initial public offerings: tests of adverse selection and signaling theories. Rev Financ Stud 7:279–319
Mok HMK, Hui YV (1998) Underpricing and aftermarket performance of IPOs in Shanghai, China. Pac Basin Finance J 6:453–474
Pástor L, Veronesi P (2005) Rational IPO waves. J Finance 58:1749–1789
Pástor L, Taylor LA, Veronesi P (2009) Entrepreneurial learning, the IPO decision, and the post-IPO drop in firm profitability. Rev Financ Stud 22:3005–3046
Pulliam S, Smith R (2000) Linux deal is focus of IPO-commission probe. Wall Street Journal, December 12, C1
Reilly FK (1973) Further evidence on short-run results for new issues investors. J Financ Quant Anal 8:83–90
Ritter JR (1984a) The “hot issue” market of 1980. J Bus 57:215–240
Ritter JR (1984b) Signaling and the valuation of unseasoned new issues: a comment. J Finance 39:1231–1237
Ritter JR (2011) Equilibrium in the initial public offering market. Annu Rev Financ Econ 3:347–374
Ritter JR, Welch I (2002) A review of IPO activity, pricing, and allocation. J Finance 57:1795–1828
Rock K (1986) Why new issues are underpriced. J Financ Econ 15:187–212
Shen Z, Coakley T, Instefjord N (2013) Earnings management and IPO anomalies in China. Rev Quant Financ Acc 42:69–93
Sherman AE, Chowdhry B (1996) The winner’s curse and international methods of allocating initial public offerings. Pac Basin Finance J 4:15–30
Sherman AE, Titman S (2002) Building the IPO order book: underpricing and participation limits with costly information. J Financ Econ 65:3–29
Stoll HR, Curley AJ (1970) Small business and the new issues market for equities. J Financ Quant Anal 5:309–322
Stoughton NM, Zechner J (1998) IPO-mechanisms, monitoring and ownership structure. J Financ Econ 49:45–77
Su D (2004) Leverage, insider ownership and the underpricing of IPOs in China. J Int Financ Mark Inst Money 14:37–54
Su D, Fleisher BM (1999) An empirical investigation of underpricing in Chinese IPOs. Pac Basin Finance J 7:173–202
Thiele T (2014) Multiscaling and stock market efficiency in China. Rev Pac Basin Financ Mark Polic 17:1450023-1–1450023-22
Tinic SM (1988) Anatomy of initial public offerings of common stock. J Finance 43:789–822
Wu C (2013) Underpricing of homecoming A-share IPOs by Chinese firms already listed aboard. Rev Quant Financ Acc 43:627–649
Zhou Z, Zhou J (2010) Chinese IPO activity, pricing, and market cycles. Rev Quant Financ Acc 34:483–503