Formation of stock prices under heterogeneous beliefs: Focusing on long-run performance of IPOs

2016 Fiscal Year Final Research Report

• Project/Area Number: 15K17088
• Research Category: Grant-in-Aid for Young Scientists (B)
• Allocation Type: Multi-year Fund
• Research Field: Money/ Finance
• Research Institution: Tokyo Institute of Technology
• Principal Investigator: Ikeda Naoshi 東京工業大学, 工学院, 助教 (90725243)
• Project Period (FY): 2015-04-01 – 2017-03-31
• Keywords: 企業金融 / 新規株式公開 / 異質的期待 / 空売り制約

Outline of Final Research Achievements

This study tests the theory of investors' heterogeneous beliefs and short-sale constraints as a potential explanation for the long-run underperformance of initial public offerings (IPOs); the theory states that the first-day price is overvalued because it only reflects optimistic investors' opinions and the resale option value brought on by short-sale constraints. This theory is difficult to test directly because investor opinion distribution is unobservable. This study focuses on Japanese auction method IPOs and estimates the investor belief distribution. As predicted by the theory, IPOs with higher proportions of optimistic investors are indeed associated with lower long-run returns.

Free Research Field

企業金融論