Original scientific paper
https://doi.org/10.1080/1331677X.2022.2113739
The impact of different sentiment in investment decisions: evidence from China’s stock markets IPOs
Dezhi Guo
Yiyin Zheng
Weishen Wang
Preng-Nien Hu
Ziqi Yang
Zejun Chen
Abstract
In this study, we used data on China’s initial public offerings (IPOs),
market volatility and macro environment before and after two
stock crashes during 2006–2016 to investigate how different
investor sentiment affects IPO first-day flipping. The empirical
results show that the expected returns of allocated investors are
affected by sentiment, with allocated investors having higher psychological
expectations of future returns during an optimistic bull
market and their optimism discouraging first-day flipping, while
higher risk-free interest rate levels and rising broad market indices
also discourage first-day flipping and tend to sell in the future. The
pessimistic bear market during which allocated investors have
lower psychological expectations of future returns, their pessimism
will promote first-day flipping, and the increase in the risk-free rate
level will also promote first-day flipping, which is the opposite of
the optimistic bull market, indicating that their risk aversion has
increased and they tend to sell on the same day. We also found an
anomaly that the greater the decline in the broad market index
during a pessimistic bear market, the more inclined the allocated
investors are to sell in the future when the broad market index rises
in an attempt to gain higher returns. These findings help explain
and understand the impact of market and macro index fluctuations
on investor behavior under different investor sentiments.
Keywords
IPO flipping; investor sentiment; herding behavior; expected return; risk aversion; cross-sectional regression; China’s stock market
Hrčak ID:
306452
URI
Publication date:
31.3.2023.
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