Особенности поведения инвесторов и недооценка акций при выходе компании на IPO

The process of going public as well as phenomenon of underpricing have been under close attention of the scholars during decades, still there is not a unified commonly accepted explanation for it. Even though numerous works have been already devoted to the matter, the research gap stays solid.
Among the major explanation to existence of underpricing the theory of behavioral finance is rather new but extremely fast developing area of studies, that analyzes two subjects of study: individual investors and managers (firms) investment behavior. While the first approach is based on the idea that investors are less than fully rational and views managerial financing and investment decisions as rational responses to securities market mispricing. The second approach emphasizes that managers are less than fully rational and analyzes the effect of nonstandard preferences as well as judgmental biases on managerial decisions. Although, a complete explanation of financing and investment patterns requires an understanding of the beliefs and preferences of these two sets of agents: individual investors and CEOs (managers), the analysis of the first category is prevalent. However, an issue of the management investing related decisions is of great importance from the practical implementation point of view (the findings on this matter probably will allow a company to increase profit) as well as from theoretical perspective.
The research gap regarding the matter exists in several dimensions; first, there is no accord on weather behavioral factors do contribute to underpricing in general – so this is the first facet that requires clarification, then direction of the behavioral factors influence is debatable. Hence, the research goal of the Master Thesis is to establish relationship between amount of IPO underpricing companies going public face and investors sentiment.
As there is still no accord in a scientific community regarding the fact weather behavioral factors at least partially determine the pricing on the first day of trading, the main idea here is to help to fill in the research gap. However, as the question of investors sentiment has already been approached by numerous scholars, the distinctive feature of the work lies in the idea of not evaluating separate behavioral characteristics influence but trying to capture the sentiment from the broader perspective by construction a measure that will reflect various investor behavioral peculiarities, thus, allowing to model the real-world situation more precisely.
The question whether investor sentiment has an impact on stock prices is of foremost importance
due to several reasons: first, as was shown by several scholars that irrational investor behavior
can be one of the causes of stock market crisis, market bubbles and consecutive negative effects
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such as significant devaluation. Two most severe crisis in the beginning of the 21 century demonstrated negative consequences of investor sentiment influence on asset prices. Second, some papers have proven that there are certain trading strategies that are based on investors behavioral peculiarities, hence, this point represents interest and attracts close attention.
The reasoning mentioned justifies the broader picture of the interest to behavioral aspects influence on the financial market, besides the IPO side has its specifics, thus, the sentiment here is important from the overall idea of losses a company may suffer from, so called amount of money left on the table. The issue is important for all parties included in the IPO process realization: for investors it is valuable to have an idea of how beneficial for them can be acquiring of the new issue; a company going public needs to understand a scale of potential detrimental effect caused by investor sentiment, an underwriter has to have this influence in mind as well to manage the listing process in a more effective way.
The overall idea of investor sentiment measurement is complicated in its nature the previous literature showed numerous sentiment proxies. While all these proxies are likely to capture some aspect of sentiment, they also contain an idiosyncratic, non-sentiment related, component. Thus, it is difficult to choose a single “best” proxy out of the individual proxies suggested in the research.
It is widely utilized practice in the literature to concentrate on a limited number of factors that partially describe the behavioral peculiarities, however, this situation forces a researcher to choose one investment sentiment measure in favor of the other as their simultaneous influence is not always possible to analyze. Besides, many researchers do not put an emphasis on picking up the characteristics that would describe an investor from different perspectives, they make a choice of the indicators based on the country stock market specifics or available indicators in place as this is a challenging task to find a suitable reflection of the behavioral aspects. While market determinants that are indirectly show the investor sentiment (so called implicit determinants) are employed more often, the characteristics of explicit influence due to the fact of their far lesser availability are analyzed to significantly less extent. The aim of the Master Thesis is to try to capture this influence as well. While the availability of data will be a key determinant here, some previous works show that this is still possible to accomplish, hence, an attempt will be undertaken. This factor will also be a turning point for a country choice. Therefore, two main things determining the sample are the activity of an IPO market and existence of direct investor behavioral measure for a country (special indices are calculated for some European countries).
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Overall, the method of that will be employed for research goal achievement is econometric analysis (classical OLS approach) with principal component analysis (a standard tool in modern data analysis applied in diverse fields, that is a simple, non-parametric method allowing to extract relevant information from extended data sets) usage for the behavior indicator construction. The justification of the idea to employ the latter method was already given, however, several words regarding the analysis and its potential limitations will be further given. Even though the proposed methodology may seem rather basic, however, it exactly corresponds with the goal stated and will allow to achieve it in a comparatively straightforward way.
The main research question the Master thesis will concentrate on is whether the amount of IPO underpricing in related to the investor sentiment.
Besides, additional concerns a researcher should have in mind when dealing with the research gap investigation are numerous. For example, the combination of which behavioral traits is primarily accountable for decisions investors undertake that influence the pricing of a company; how individual investors can influence a company underperformance at all, what mechanisms stay behind that; is there a possibility for a firm to mitigate the underpricing by somehow adjusting investors behavior and whether they should do it at all, what factors make an investor a threat to a company short term performance and to what extent they can be controlled by the investors themselves. Or why the phenomenon of IPO underpricing exists and what are the prime determinants of this issue; what is the evidence behind the opposing scientific opinions on the behavioral finance application to IPO underpricing, whether explaining the IPO underpricing phenomenon from the behavioral aspect contradicts any other explanation theory.
All the concerns mentioned above represent interest from both practical and theoretical aspect as by receiving answers to them managerial implication can be influenced significantly as well as the existing research gap clarified. Initially, some of the questions seem hard to be answered especially those connected to behavioral aspects, but the empirical analysis is expected to shed light on them, while other part of the questions stated relies heavily on the literature review thorough analysis.
In general, each of the concerns stated allows paying closer attention to different aspects of the problem under consideration. One of them, for example, is concentrated on the sentiment measures choice that is a crucial milestone that needs to be decided on when designing empirical part of the analysis. The main thing here is whether availability of data allows the research to stand out by inclusion of explicit investors’ characteristics and, thus capturing investment sentiment traits in a more thorough manner.
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Another important concern is about the overall mechanism that is stated behind the behavioral aspects influence on the underpricing phenomenon. This point represents not only the basis for the overall research canvas, but also builds understanding of the future results obtained and reality, as it is easy to get lost in numbers and loose the connection to the underlying phenomenon. Then it is for sure impossible to study a subject without immersing into its functioning, regulating laws and peculiarities. The following concern is connected to the opposing scientific branches that see the issue from different scopes and have the evidence to back them up. Here the problem of which of the points of view to share arises, for sure, there are numerous factors that determine the results obtained by different scholars: starting from sample specifics represented by time period, country peculiarities, industries under consideration to indicators usage and justification of the mechanisms underlying.
In general, all the research questions stated allow clarifying the order of steps the research will follow and raise concern on the important matters that are needed to be kept in mind while performing each stage. However, it is necessary to emphasize that some of the research questions are formulated in a broad manner so this is possible that not every aspect of them will be covered ultimately, nevertheless, it is better to still try giving attention to them as it is important to cover these subjects of concern at least partially for covering the research goal in a more thorough and appropriate manner.