Correlation of Valuation Divergences of IPO: the Bidding Difference of Institutions and the Variability of Initial Returns

Abstract

Abstract: Under the book-building, the IPO valuation divergences of the investors mainly reflect in the period of the book-building and the initial stage of the second market. This paper has empirically studied the correlation of the valuation divergences of the IPO between the two phases, which uses the bidding difference of the institutions and the variability of the IPO initial returns as the proxy variables of the valuation divergences in the two phases based on the IPOs which have listed during the second reform of the book-building method. Conclusions have been made from this research:there is a significantly negative correlation between the valuation divergences of the same IPO in the different phases, and there is a significantly positive correlation between the valuation divergences of the different IPOs in the same phase. It indicates that the valuation divergence of the first market has adversely reflected the one of the second market in advance, and the bidding difference of the institutions and the variability of the initial returns of the IPOs which have listed earlier can predict the ones of the IPO in the current period. The results of this research will offer scientific strategies for investor who participates in the book-building and trades in the initial stage of the second market.

Key words: book-building, institutional investors, valuation divergences of IPO, variability of IPO initial returns

CLC Number:

F830.91

HUANG Shun-wu, WANG Ning, YU Kai. Correlation of Valuation Divergences of IPO: the Bidding Difference of Institutions and the Variability of Initial Returns[J]. , 2018(04): 21-34.

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