A game-theoretic model of underpricing and over-subscription in Chinese IPO’s
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Publication type
Journal article with impact factorPublication Year
2016Journal
Finance Research LettersPublication Volume
17Publication Issue
MayPublication Begin page
93Publication End page
96
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In Chinese A-share IPO’s the bulk of available stock is allocated to investors via a lottery, with the payoff structure of participating in an IPO resembling a game. We solve a simple version of the game for the static Nash equilibrium in continuous strategies and derive the optimal IPO deposit for an arbitrary number of investors with common risk aversion within a two-moment decision model. A data set of 1121 Chinese A-share IPO’s provides empirical support for our results.Knowledge Domain/Industry
Accounting & Financeae974a485f413a2113503eed53cd6c53
10.1016/j.frl.2016.02.001