 Sentiment and information: How ‘over-optimistic’ investors influence differences of opinion and IPO pricing?Di Wu and Danlu Bu International Review of Financial Analysis, 2024, vol. 95, issue PB Abstract: Miller (1977) predicts that under short-sale constraints, when emotional investors gain stronger bargaining power relative to rational investors, disagreement among investors widens, leading to overvaluation of IPOs. With a difference-in-differences model, we find that the 2021 reform of China's inquiry system expanded investor disagreement due to the introduction of overly optimistic investors, resulting in overvaluation of IPOs and poor initial returns. Influenced by overly optimistic investors, rational investors experience a partial increase in information levels, generating a masking effect in the emotional impact chain. Our study supports Miller's hypothesis, contributing to understanding the roles of ‘emotion’ and ‘information’ in shaping disagreement and enhancing IPO pricing efficiency. Keywords: Difference of opinion; Initial public offering (IPO); Heterogeneous beliefs; Optimism rationality; First-day market price (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924003685 DOI: 10.1016/j.irfa.2024.103436 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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