HOW DOES INVESTOR SENTIMENT INFLUENCE IPO INITIAL RETURN AND LONG-TERM PERFORMANCE? AN AGENT-BASED COMPUTATIONAL FINANCE APPROACH

Xiong Xiong, Jinyi Zhang, Zhenwei Lv and Gaofeng Zou
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Xiong Xiong: College of Management and Economics, Tianjin University, Tianjin 300072, P. R. China
Jinyi Zhang: College of Management and Economics, Tianjin University, Tianjin 300072, P. R. China
Zhenwei Lv: College of Management and Economics, Tianjin University, Tianjin 300072, P. R. China
Gaofeng Zou: College of Management and Economics, Tianjin University, Tianjin 300072, P. R. China

The Singapore Economic Review (SER), 2023, vol. 68, issue 03, 899-915

Abstract: This study builds an agent-based computational finance platform that can reproduce the basic characteristics of China’s initial public offering (IPO) market and explain its anomalies. The results of our computational experiments show that along with the increasing proportion of sentiment strategy investors (i.e., those with an information advantage) entering the market, the IPO underpricing rate also rises correspondingly. Sentiment investors usually suffer losses because of their irrational investment decisions, while sentiment strategy investors profit by preying on sentiment investors.

Keywords: Investor sentiment; initial public offering; underpricing; agent-based computational finance (search for similar items in EconPapers)
JEL-codes: D21 G11 G30 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S0217590819500437

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