A game-theoretic model of underpricing and over-subscription in Chinese IPO’s

Paul Geertsema and Helen Lu

Finance Research Letters, 2016, vol. 17, issue C, 93-96

Abstract: In Chinese A-share IPO’s the bulk of available stock is allocated to investors via a lottery, with the payoff structure of participating in an IPO resembling a game. We solve a simple version of the game for the static Nash equilibrium in continuous strategies and derive the optimal IPO deposit for an arbitrary number of investors with common risk aversion within a two-moment decision model. A data set of 1121 Chinese A-share IPO’s provides empirical support for our results.

Keywords: IPO underpricing; Risk aversion; Game theory (search for similar items in EconPapers)
JEL-codes: C70 D40 D81 G15 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:17:y:2016:i:c:p:93-96

DOI: 10.1016/j.frl.2016.02.001

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