The Study on IPO Underpricing in Chinese GEM Stock Market: Based on the Perspective of Noise Traders

The IPO under-pricing prevalently occurs in the domestic and international market, but the under pricing is more severe in Chinese GEM IPO market. Foreign study on under pricing is divided into the primary and secondary market research, and this paper studies the issue of IPO under pricing from the perspective of noise traders in the secondary market. We establish multiple linear regression models with the stock price on the initial day and the IPO under pricing as the dependent variable, introducing the alternative variables of two kinds of noise traders and other control variables as the explanatory variables. The empirical study finds that noise traders are significantly correlated with the stock price on the initial day and the IPO under pricing.