Investor Sentiment and Short Run IPO Anomaly: A Behavioral Explanation of Underpricing

Commerce

Abstract
INTRODUCTION
Section 1- Short run IPO anomaly and traditional explanations
I- Underpricing anomaly: a persistent phenomenon that characterizes IPO market
I-1\\ Underpricing definition:
I-2\\ A persistent anomaly in time:
I-3\\ A persistent anomaly in all countries:
I-4\\ A persistent anomaly in all industries:
II- Theoretical explanations of short run underpricing: A literature review
II-1\\ Asymmetric information:
II-1-1\\ The issuer is more informed than the investors: Welch (1989) and others assume
that the issuer is better informed about its true value.

II-1-2\\ The investors are the most informed:
* Information Revelation Theories:
* Winner’s Curse:
* Agency conflicts: The agency problems between the underwriter and the issuing
firm.

II-2\\ Symmetric information:
II-2-1\\ Risk premium:
II-2-2\\ Characteristics of the Initial Public offering:
* Risk: Risk can reflect either technological or valuation uncertainty.
* Issue size: The issue size or offer size is the number of shares introduced in IPO
market and offered by the issuing company for sale.

* Bargaining power:
II-2-3\\ Lawsuit avoidance: legal liability
II-2-4\\ Underpricing as a substitute of marketing expenditures:
II-2-5\\ Internet Bubble:
II-2-6\\ Price stabilization and partial adjustment:
Section 2- Behavioral explanations
I- Definitions:
I-1\\ The sentiment’s notion:
I-2\\ Hot IPO market’s phenomenon:
I-3\\ Investors typology:
II- Literature review of behavioral explanations:
II-1\\ Informational cascades:
II-2\\ The prospect theory :
II-3\\ Investor sentiment by Ljungqvist, Nanda and Singh (2004):
II-4\\ The use of Grey Market Data:
II-5\\ The use of market conditions to value investor’s sentiment:
II-6\\ Discount on closed-end funds as proxy for investor sentiment:
II-7\\ Other proxies and empirical results:
Section 3- The model and empirical implications
I- The model and explanatory variables:
I-1\\ The model:
I-2\\ The explanatory variables:
I-2-1\\ Informational Asymmetry Theory:
I-2-2\\ Theory asserting informational symmetry and IPO market efficiency:
I-2-3 \\ Investor sentiment and Behavioral approach:
II- Data Description:
III- Empirical implications and analysis:
CONCLUSION
References