Are the Hot IPOs Still Relevant? Evidence from China's Growth Enterprise Market

Authors

  • Lu Yang Zhongnan University of Economics and Law
  • Huimin Zhang Wuhan University
  • Shigeyuki Hamori Kobe University

DOI:

https://doi.org/10.6000/1929-7092.2015.04.04

Keywords:

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

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.

Author Biographies

Lu Yang, Zhongnan University of Economics and Law

Finance

Huimin Zhang, Wuhan University

Foreign Language and Literature

Shigeyuki Hamori, Kobe University

Economics

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Published

2015-02-27

Issue

Section

Articles