Topic: The Winner’s Curse and Lottery-Allocated IPOs in China
Presenter：Dr. Zhe Shen， Assistant Professor of Finance， Institute for Financial & Accounting Studies, Xiamen University
Time: September 28, 2007（Friday）3：00—4：30 PM
Venue: Room 513, Jiageng Bld 2
Chair： Yujun Wu, assistant professor in finance, IFAS
Abstract：
This is the first study of Rock’s (1986) winner’s curse hypothesis in which over-subscribed IPOs are allocated by a pure lottery mechanism. It employs a unique dataset of 562 Chinese IPOs 1996-2001 which provides information for the estimation of allocation-weighted returns. The results provide much stronger support than hitherto for the winner’s curse hypothesis. Allocations are inversely related to underpricing in line with adverse selection. Weighting by allocation dramatically reduces median abnormal returns more than 200-fold from 116% and uninformed investors earn a median return of just 0.51%. The winner’s curse can explain underpricing in our sample of Chinese IPOs.
Presenter Introduction：
Dr.Zhe Shen received his B.A. degree in Accountancy from Hangzhou Institute of Commerce, and M.Sc degree in Accounting and Financial Economics, and Ph.D. degree in Finance from University of Essex UK. He has recently joined the Institute of Financial and Accounting Studies at Xiamen University as Assistant Professor of Finance. His research interest includes IPOs, behavioral finance, and earnings management.
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