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How Does Investor Sentiment Influence Ipo Initial Return And Long-Term Performance? An Agent-Based Computational Finance Approach

Author

Listed:
  • XIONG XIONG

    (College of Management and Economics, Tianjin University, Tianjin 300072, P. R. China)

  • JINYI ZHANG

    (College of Management and Economics, Tianjin University, Tianjin 300072, P. R. China)

  • ZHENWEI LV

    (College of Management and Economics, Tianjin University, Tianjin 300072, P. R. China)

  • GAOFENG ZOU

    (College of Management and Economics, Tianjin University, Tianjin 300072, P. R. China)

Abstract

This study builds an agent-based computational finance platform that can reproduce the basic characteristics of China’s initial public offering (IPO) market and explain its anomalies. The results of our computational experiments show that along with the increasing proportion of sentiment strategy investors (i.e., those with an information advantage) entering the market, the IPO underpricing rate also rises correspondingly. Sentiment investors usually suffer losses because of their irrational investment decisions, while sentiment strategy investors profit by preying on sentiment investors.

Suggested Citation

  • Xiong Xiong & Jinyi Zhang & Zhenwei Lv & Gaofeng Zou, 2023. "How Does Investor Sentiment Influence Ipo Initial Return And Long-Term Performance? An Agent-Based Computational Finance Approach," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 68(03), pages 899-915, June.
    • Handle: RePEc:wsi:serxxx:v:68:y:2023:i:03:n:s0217590819500437
    DOI: 10.1142/S0217590819500437
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    More about this item

    Keywords

    Investor sentiment; initial public offering; underpricing; agent-based computational finance;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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