The impact of investor sentiment on IPO underpricing
type: CreativeWork
description: We find that the abnormal trading by small investors is positively related to IPO underpricing. In addition to this firm specific investor sentiment, the market wide investor sentiment is also positively related with IPO underpricing significantly. Investor sentiment is positively related with IPO underpricing for both high and low investor sentiment. We show that for harder to arbitrage firms the positive relation between IPO underpricing and sentiment is more pronounced. We also find that the volatility of IPO underpricing is positively related to investor sentiment and infer that it is not only information asymmetry that matters, but also the degree of excess optimism or pessimism of investors in the market.
abstract: We find that the abnormal trading by small investors is positively related to IPO underpricing. In addition to this firm specific investor sentiment, the market wide investor sentiment is also positively related with IPO underpricing significantly. Investor sentiment is positively related with IPO underpricing for both high and low investor sentiment. We show that for harder to arbitrage firms the positive relation between IPO underpricing and sentiment is more pronounced. We also find that the volatility of IPO underpricing is positively related to investor sentiment and infer that it is not only information asymmetry that matters, but also the degree of excess optimism or pessimism of investors in the market.
author: LIN ZHAN
keywords: behavioral finance, sentiment, initial public offering, underpricing, investment banking, underwriters
date published: 2010-10-29
date modified: 2026-07-24T03:32:18Z
provider: National University of Singapore
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: National University of Singapore