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Information Systems and e-Business Management

, Volume 16, Issue 4, pp 761–774 | Cite as

Investors’ attention and overpricing of IPO: an empirical study on China’s growth enterprise market

  • Hailiang Huang
  • Yanhong Li
  • Yingying Zhang
Original Article
  • 191 Downloads

Abstract

In China, the Growth Enterprise Market (GEM) is a brand new market that provides an additional way of financing for firms with good growth potential. Whereas there has been a massive amount of stocks breaking on the first trading day since 2010, the risk of IPO’s overpricing in China’s GEM has drawn more and more attention in recent years. Based on the theory of behavioral finance and limited attention, investors’ attention may be a quite indicative determinant to the IPO overpricing. Accordingly, we collected data from Internet including online stock forums and search engines, then built multiple investors’ attention metrics that were distinct to the traditional metrics from the offline stock market. In the empirical study, we built regression models to dig out the determinants of IPO’s overpricing and found that the hybrid model containing both online metrics and financial metrics outperformed the others considerably. The adjusted R-square of the hybrid model containing both online metrics and financial metrics is as high as 82.8%, in contrast to 18.2% for the model containing only the financial metrics and 59.3% for that containing only investors’ attention.

Keywords

Investors’ attention Text mining Growth Enterprise Market (GEM) Overpricing of IPO 

Notes

Acknowledgements

This work was supported partly by the National Science Foundation of China (NSFC No. 71601106) and Shanghai Science & Technology Innovation Project (No. 16511102900).

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Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  1. 1.School of Information Management and EngineeringShanghai University of Finance and EconomicsShanghaiChina
  2. 2.Shanghai Key Laboratory of Financial Information TechnologyShanghaiChina

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