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- Title
Chinese IPO activity, pricing, and market cycles.
- Authors
Zhong-guo Zhou; Zhou, Janet
- 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.
- Subjects
CHINA; GOING public (Securities); MARKET pricing; RETURNS on sales; STOCK exchanges; SECURITIES trading
- Publication
Review of Quantitative Finance & Accounting, 2010, Vol 34, Issue 4, p483
- ISSN
0924-865X
- Publication type
Article
- DOI
10.1007/s11156-009-0147-6