Overreaction in ChiNext IPOs' initial returns: How much and what caused it?

Qi Deng; Zhong guo Zhou

doi:10.1016/j.ememar.2016.08.012

Overreaction in ChiNext IPOs' initial returns: How much and what caused it?

Qi Deng, Zhong guo Zhou^*

^*Corresponding author for this work

International Business School Suzhou

California State University Northridge

Research output: Contribution to journal › Article › peer-review

16 Citations (Scopus)

Abstract

This paper studies overreaction in initial returns for ChiNext IPOs. We hypothesize the initial return contains a fundamental underpricing and an overreaction. The fundamental is represented by the 21st day return and the difference between the initial and 21st day returns represents overreaction. We investigate this conjecture and identify the variables that are significant for both returns, for one but not for the other, and for the difference. The initial return is driven more by short-term and market factors that cause overreaction while the 21st day return is affected more by an issuer's fundamentals. The overreaction is only weakly time-varying.

Original language	English
Pages (from-to)	82-103
Number of pages	22
Journal	Emerging Markets Review
Volume	29
DOIs	https://doi.org/10.1016/j.ememar.2016.08.012
Publication status	Published - 1 Dec 2016

Keywords

1st day and 21st day initial returns
Internal and external conditions
Model specification
Overreaction
Short- and long-term factors

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10.1016/j.ememar.2016.08.012

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Deng, Q., & Zhou, Z. G. (2016). Overreaction in ChiNext IPOs' initial returns: How much and what caused it? Emerging Markets Review, 29, 82-103. https://doi.org/10.1016/j.ememar.2016.08.012

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abstract = "This paper studies overreaction in initial returns for ChiNext IPOs. We hypothesize the initial return contains a fundamental underpricing and an overreaction. The fundamental is represented by the 21st day return and the difference between the initial and 21st day returns represents overreaction. We investigate this conjecture and identify the variables that are significant for both returns, for one but not for the other, and for the difference. The initial return is driven more by short-term and market factors that cause overreaction while the 21st day return is affected more by an issuer's fundamentals. The overreaction is only weakly time-varying.",

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N2 - This paper studies overreaction in initial returns for ChiNext IPOs. We hypothesize the initial return contains a fundamental underpricing and an overreaction. The fundamental is represented by the 21st day return and the difference between the initial and 21st day returns represents overreaction. We investigate this conjecture and identify the variables that are significant for both returns, for one but not for the other, and for the difference. The initial return is driven more by short-term and market factors that cause overreaction while the 21st day return is affected more by an issuer's fundamentals. The overreaction is only weakly time-varying.

AB - This paper studies overreaction in initial returns for ChiNext IPOs. We hypothesize the initial return contains a fundamental underpricing and an overreaction. The fundamental is represented by the 21st day return and the difference between the initial and 21st day returns represents overreaction. We investigate this conjecture and identify the variables that are significant for both returns, for one but not for the other, and for the difference. The initial return is driven more by short-term and market factors that cause overreaction while the 21st day return is affected more by an issuer's fundamentals. The overreaction is only weakly time-varying.

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KW - Short- and long-term factors

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SN - 1566-0141

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SP - 82

EP - 103

JO - Emerging Markets Review

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ER -

Overreaction in ChiNext IPOs' initial returns: How much and what caused it?

Abstract

Keywords

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