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Factors on IPO under-pricing based on behavioral finance theory: Evidence from China

IPO under-pricing phenomenon is popular widely in various capital markets in the world. Which is always regarded as one difficult area in financial research. So far, many researchers contribute and draw conclusions based on different theories. Furthermore, based on behavioral finance theory, the explanations become further persuasive. But more evidences are also be needed to support them. This paper, based on previous studies and behavioral finance theory, analyzes firstly factors influence on IPO under-pricing by sampling China's SME and GEM stock markets. Then, applying sequential sequent regression approaches to determine the main reasons IPO under-pricing. The results show that the factor of heterogeneous expectation affect obviously on IPO under-pricing in both markets, while investor sentiment only significantly affects on IPO under-pricing in SME market.