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Institutional Trading in IPOs and Post-IPOs: Value-Based vs Speculative |
Dongmin Kong1(), Yuanyuan Shao2(), Jing Huang3() |
1. School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China; 2. School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China; 3. School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China |
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Abstract Using a unique dataset from Shanghai Stock Exchange, we study institutional trading behaviors in IPOs and post-IPOs. From the perspective of value-based or speculation, we find that, (1) institutional investors are flippers on the first day of IPOs, (2) trading by institutional investors and the active institutional investors (mutual funds or brokerage) is value-based, and (3) the net buys of institutional investors can predict the long term performance of IPO-firms and shows a negative relation with a bubble in future. Since individual investors are the opponent of institutional investors, our results mean that individuals are speculators in the market. Our study suggest that institutional investors are the sophisticated ones in the market and they can process information more efficiently, whose value-based trading can enhance market price discovery and is good for market stabilization.
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Keywords
IPOs
institutional investor
trading behavior
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Corresponding Author(s):
Dongmin Kong,Email:kongdm@hust.edu.cn; Yuanyuan Shao,Email:shaoyy.happy@163.com; Jing Huang,Email:hj901103@gmail.com
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Issue Date: 05 March 2011
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