Abstract - Are the Hot IPOs Still Relevant? Evidence from China’s Growth Enterprise Market

Journal of Reviews on Global Economics

Are the Hot IPOs Still Relevant? Evidence from China’s Growth Enterprise Market
Pages 43-50
Lu Yang, Huimin Zhang and Shigeyuki Hamori

DOI: http://dx.doi.org/10.6000/1929-7092.2015.04.04

Published: 27 February 2015

Open Access 


Abstract: This paper investigates whether the hot IPO effect persists post-IPO in China’s Growth Enterprise Market (GEM) based on the dynamic equicorrelation of trading volume and stock returns. We find that the hot IPO effect ends after two years with the imbalance between demand and supply for GEM stock relieved, which indicates that the rational learning process requires almost two years for most investors. Further, we confirm that returns and volumes are positively correlated at the 1% significance level. This result indicates that the fundamental analysis may not apply to the GEM because the information content of trading volume is capable of forecasting stock returns.

Keywords: Hot IPOs, Dynamic equicorrelation (DECO), Growth Enterprise Market (GEM), China.
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