Pub Date : 2025-01-01DOI: 10.1016/j.finmar.2024.100936
Di Wu , Xiaoke Cheng , Kam C. Chan , Shenghao Gao
Using a reform to relax the exclusion rate of highest bids in the book-building process as an exogenous shock, we find that IPO underpricing decreases, which indicates that excluding a certain percentage of the highest bids impairs IPO pricing efficiency. Further tests reveal that relaxing the mandate increases investors’ valuation of an IPO, thereby decreasing IPO underpricing. Our results also suggest that the relaxation of the stipulation motivates investors to provide more information, as revealed by fewer anchoring bids and reduced herding behavior, as well as higher opinion divergence and better predictive power for investor bids on post-IPO prices.
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Pub Date : 2025-01-01DOI: 10.1016/j.finmar.2024.100947
Xiaodi Zhang
Opinions by media experts and pundits in both traditional media outlets and online venues influence investors. While a published opinion could be more accurate than that of a typical investor, its influence displaces many independent views and has the potential to introduce a shared error. My probabilistic trading model characterizes such influence and demonstrates how the “wisdom of the crowds” effect leads convergence of prices to the fundamental value. I use two corporate events to test the model, and find evidence consistent with the theoretical predictions.
{"title":"The price evolution in financial markets under influence of published opinions","authors":"Xiaodi Zhang","doi":"10.1016/j.finmar.2024.100947","DOIUrl":"10.1016/j.finmar.2024.100947","url":null,"abstract":"<div><div>Opinions by media experts and pundits in both traditional media outlets and online venues influence investors. While a published opinion could be more accurate than that of a typical investor, its influence displaces many independent views and has the potential to introduce a shared error. My probabilistic trading model characterizes such influence and demonstrates how the “wisdom of the crowds” effect leads convergence of prices to the fundamental value. I use two corporate events to test the model, and find evidence consistent with the theoretical predictions.</div></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"72 ","pages":"Article 100947"},"PeriodicalIF":2.1,"publicationDate":"2025-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143336288","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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