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Investor sentiment and IPO pricing during pre-market and aftermarket periods: Evidence from Hong Kong

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  • Jiang, Li
  • Li, Gao

Abstract

Using a sample of 293 IPOs in Hong Kong, we separately measure pre-market and aftermarket sentiments and examine their impact on IPO pricing in a two-stage framework. We find that underwriters only partially adjust offer price to reflect pre-market sentiment and money left on the table is positively related to the deterioration of investor sentiment in the aftermarket period. We also show that aftermarket sentiment causes a further price run-up in the secondary market. Overall, our findings suggest that institutional investors play an important role of re-distributing shares in the secondary market and underwriters take into consideration of investor sentiment in pricing IPOs during pre-market and aftermarket periods.

Suggested Citation

  • Jiang, Li & Li, Gao, 2013. "Investor sentiment and IPO pricing during pre-market and aftermarket periods: Evidence from Hong Kong," Pacific-Basin Finance Journal, Elsevier, vol. 23(C), pages 65-82.
  • Handle: RePEc:eee:pacfin:v:23:y:2013:i:c:p:65-82
    DOI: 10.1016/j.pacfin.2013.01.006
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    References listed on IDEAS

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    Cited by:

    1. repec:wsi:rpbfmp:v:20:y:2017:i:02:n:s0219091517500102 is not listed on IDEAS
    2. repec:eee:corfin:v:48:y:2018:i:c:p:726-751 is not listed on IDEAS
    3. Mazouz, Khelifa & Mohamed, Abdulkadir & Saadouni, Brahim & Yin, Shuxing, 2017. "Underwriters' allocation with and without discretionary power: Evidence from the Hong Kong IPO market," International Review of Financial Analysis, Elsevier, vol. 49(C), pages 128-137.
    4. Brzeszczyński, Janusz & Gajdka, Jerzy & Kutan, Ali M., 2015. "Investor response to public news, sentiment and institutional trading in emerging markets: A review," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 338-352.
    5. Paul B. McGuinness, 2016. "Post-IPO performance and its association with subscription cascades and issuers’ strategic-political importance," Review of Quantitative Finance and Accounting, Springer, vol. 46(2), pages 291-333, February.
    6. McGuinness, Paul B., 2014. "IPO firm value and its connection with cornerstone and wider signalling effects," Pacific-Basin Finance Journal, Elsevier, vol. 27(C), pages 138-162.
    7. Arnab Bhattacharya & Binay Bhushan Chakrabarti, 2014. "An Examination of Adverse Selection Risk in Indian IPO After-Markets using High Frequency Data," International Journal of Economic Sciences, University of Economics, Prague, vol. 2014(3), pages 01-49.

    More about this item

    Keywords

    Investor sentiment; IPO pricing; Institutional investors; Aftermarket trading;

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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