RESEARCH CIA-1

METHODOLOGY
KRISH GARG 22211642
 BEHAVIOURAL BIAS IN IPO MARKET
MAJUMDAR NIARV, JOSHI DR PRASHANT AND DR KRISHNA
KANT
It has been observed that investors in the IPO market attempt
to make superior profit in the short run. Hayat & Anwar, 2016
suggest not all investors are well versed in investment and
possess poor financial literacy as well as financial prudence.
Seawright, 2012 identified the 10 most common Behavioural
Biases viz. confirmation bias, optimism bias, loss aversion,
self-serving bias, the planning fallacy, choice paralysis,
herding, preference to stories to analysis, recency bias, and
blind spot bias. This study is based on Primary data. The data
are collected through the Survey Method . The study proves
that the investors show Behaviour Bias in their investment
decisions in the IPO Market. Overall Investors exhibit Loss
Aversion Bias, Stories to Facts Bias, Recency Bias, &
Overconfidence Bias. While they are not biased for
Confirmation, Self-Serving, Planning Fallacy, Choice
Paralysis, Herding, Rule of Thumb and Disposition Effect.
IMPACT OF BEHAVIOURAL BIASES ON INVESTMENT
DECISION TOWARDS IPOS
P. NARESH KUMAR AND DR. L. BALAMURUHGAN

This study offers insightful knowledge regarding the stock

market access habits of retail investors in India. This
study's primary objective is to examine the impact of
behavioral bias factors on Investment Decisions towards
IPOs A sample design is a technique or procedure used by
the researcher to choose elements for the sample. The
sample design must be chosen by the YMER || researcher
after considering the nature of the inquiry and other
relevant criteria (Kothari C.R., 2004). The results of this
descriptive study investigate how investors' biases affect
their overall investing choices concerning initial public
offerings. In addition, investor behaviour, heuristics,
herding, and gambling bias factors each have a big impact
on how investors decide which stocks to buy.
AN ANALYSIS OF BEHAVIOURAL BIAS IN INVESTMENT
GEETIKA MADAAN AND SANJEET SINGH

This research study covered 4 different behavioural biases to

complete the study. These behavioural biases are
Overconfidence, Anchoring, Disposition effect, and Herding
bias. The present study is a cross-sectional study and the
Quantitative method is used for data analysis. A questionnaire
was designed and a survey method was applied to obtain
responses. The discipline of behavioural finance has emerged in
response to handling the difficulties faced by the traditional
finance discipline.
In essence, behavioural finance explains that investment
choices are not always influenced based on rationality.
Behavioural finance also tried to understand the investment
market anomalies by unwinding the two assumptions of
standard finance, that is, (i) investors fail to update their beliefs
precisely and (ii) there is a systematic variation from the
normative process in making investment choices (Kishore,
2004).
DOES BEHAVIOURAL BIASES INFLUENCE INDIVIUAL
INVESTMENT DECISIONS​
AIGBOVO O AND IILABOYA O.J

This paper empirically investigates whether behavioural

biases rather than the rationalism provided by the
traditional finance theories play important role in shaping
the investment decisions of individual investors in Nigeria.
The study adopts a survey research design. The population
of the study was based on all individual investors in
Nigeria. ​

Major findings showed that individual investor decisions

were not significantly related to representativeness bias,
overconfidence/self-attribution bias, loss aversion and
regret aversion bias. However, hindsight bias significantly
influences individual investor decisions.
INFLUENCE OF SELECTED BEHAVIOURAL BIASES IN IPO
MARKET BY
AMIT KUMAR SINGH , AMIYA KUMAR MOHAPATRA , MOHIT
KUMAR AND ANKUR SAXENA
This research study covered 4 different behavioural biases to
complete the study. These behavioural biases are
Overconfidence, Anchoring, Disposition effect, and Herding
bias. The present study is a cross-sectional study and the
Quantitative method is used for data analysis. A questionnaire
was designed and a survey method was applied to obtain
responses. The discipline of behavioural finance has emerged in
response to handling the difficulties faced by the traditional
finance discipline.
In essence, behavioural finance explains that investment
choices are not always influenced based on rationality.
Behavioural finance also tried to understand the investment
market anomalies by unwinding the two assumptions of
standard finance, that is, (i) investors fail to update their beliefs
precisely and (ii) there is a systematic variation from the
normative process in making investment choices (Kishore,
2004).
PRANAV VIN 22211652
 INVESTOR SENTIMENT AND
PRE-IPO MARKETS
Cornelli, F and et.al. (2004) have tried to investigate
the what role does sentiments play in the pricing of
stocks that are to be listed for the first time. A
sample set of 486 companies that went public from
November 1995 to December 2002 is taken. Grey
market and IPO prices were correspondingly
analyzed for each company. The data reveals there is
an asymmetric relation between grey market prices
and post-issue prices. Investor sentiment is a key
factor that helps stocks to reach their fundamental
values, however underwriters still consider investors
to be biased in their view of the respective stock
performance.
 IPO PRICING AND THE RELATIVE
IMPORTANCE OF INVESTOR SENTIMENT:
EVIDENCE FROM GERMANY
Oehler, A and et.al. (2004) using both censored and
uncensored data, the cross-sectional regression
analysis demonstrates that investor sentiment and
demand, rather than ex-ante uncertainty, had a
greater impact on initial returns, particularly during
the dot-com boom. The dataset used in this paper
covers the period 1997-2001 and contains all initial
listings on the Frankfurt Stock Exchange. Companies
being traded nationally or internationally before
going public on the Frankfurt Stock Exchange have
been excluded. We conclude that, in times when a
large degree of market optimism is present,
underpricing is not primarily caused by ex-ante
uncertainty; rather, the initial return is mostly
determined by investor sentiment.
INVESTOR SENTIMENT IN THE
STOCK MARKET
Baker, M. and Wurgler, J. (2007) venture into providing
theoretical predictions that try to analyze and interpret
investor behavior in-order to accurately measure it.
They create a sentiment index by aggregating multiple
proxies and demonstrate its correlation with significant
speculative events over the last four decades. It was
concluded that in the future, the investor sentiment
approach will need to tackle several tasks, such as
defining and quantifying uninformed demand or
investor sentiment, comprehending the underlying
factors and how they change over time, and identifying
which specific stocks draw speculators or have little
room for arbitrage. Although there is still more work to
be done in order to fully define this paradigm, there
could be significant benefits to having a better grasp of
investor mood.
 INVESTOR SENTIMENT AND IPO PRICING
DURING PRE-MARKET AND AFTERMARKET
PERIODS: EVIDENCE FROM HONG KONG
Li, J. and Li, G. (2013) have evaluated pre-market and
aftermarket attitudes independently using a sample of
293 Hong Kong IPOs, and examine at how they drive
IPO price using a two-stage methodology. They have
chosen to utilize Chen and Wilhelm's (2008) two-stage
approach to analyze the dynamics of investor sentiment
as it moves from the pre-market to the aftermarket
phases. While we examine the effect of sequentially
arriving sentiment investors on IPO pricing, Chen and
Wilhelm concentrate on the transition to account for the
consecutive arrivals of educated traders. Underwriters
take advantage of pre-market investor sentiment by
raising the offer price so long as demand in the public
tranche indicates it. It seems that pre-market demand for
an IPO in a public tranche is driven by investor interest.
INDIVIDUAL INVESTOR SENTIMENT
AND IPO STOCK RETURNS: EVIDENCE
FROM THE KOREAN STOCK MARKET
Chung, Y.C. and et.al. (2017) looks into the
influence of individual investors’ pre-
market and aftermarket sentiment on initial
public offering (IPO) stock returns, based
on 382 IPO companies in the Korean stock
market between 2007 to 2014. This study
indicates that a significant amount of the
high early returns of IPO equities in the
Korean IPO market can be attributed to the
pre-market sentiment of individual
investors.
KEY POINTS
Investor sentiment is a key factor that drives pre-issue prices.
Underwriters take advantage of positive investor sentiment.
Investor behavior cannot be quantified in a fully comprehendible form.
In period of positive sentiment among investors, demand for the IPO increases and
vice-versa.
Positive sentiment tends to reduce perceived risk, in contrast, during periods of low
sentiment, investors may be more risk-averse and scrutinize IPOs more carefully.
Thus, investor sentiment significantly influences the pricing, demand, and overall
success of IPOs.
SARVESH KHAITAN 22211884
IPO UNDERPRICING, ISSUE
MECHANISMS, AND SIZE BY T. P.
MADHUSOODANAN 30TH JANUARY, 2004
This essay examines IPO pricing in the Indian
setting. The impact of Bookbuilding's
introduction on IPO pricing is also investigated
in this research.
While underpricing of initial public offerings
(IPOs) has been the subject of much research in
developed markets, little has been done in the
Indian context. Nearly all markets have
documented instances of short-run underpricing
(for a comparison of 25 nations, see Loughran
et al., 1994).
 COLLATERAL REGULATION AND IPO‐
SPECIFIC LIBERALISATION BY STAVROS
THOMADAKIS
This study employs a novel testing ground to
examine how price constraints affect initial
returns and IPO pricing. The Athens Stock
Exchange provides the setting for this novel
experiment since, in just eight years, it
underwent three significant revisions to its
limit restrictions.
The regulation of IPOs has a long history
around the world and is linked to intrinsic
informational asymmetries that surround
new listings (Chan et al., 2004; Chambers
and Dimson, 2009; Carpentier et al., 2012;
Ekkayokkaya and Pegniti, 2012; Burhop et
al., 2014).
DELIBERATE PREMARKET
UNDERPRICING AND AFTERMARKET
MISPRICING: NEW INSIGHTS ON IPO
PRICING BY BEAT REBER
Using Stochastic Frontier Analysis, we
break down initial returns into intentional
premarket underpricing and aftermarket
mispricing. We describe intentional
underpricing as a function of market
participants' proxies for the information
asymmetry surrounding IPO value. By
purposefully underpricing the IPO, equity
held is an improbable signaling strategy to
communicate IPO value to outside
investors.
 DETERMINES IPO UNDERPRICING BY BEN
SLAMA
Several empirical studies documented the existence
of the initial underpricing phenomenon for newly
listed firms during the early days of trading across
many countries and capital markets. Early studies
examined the performance of IPOs on the US
market. Ibbotson (1975) find an average abnormal
return of 11.4. Loughran and Ritter (1995) based on
their survey of papers on the IPO underpricing report
average initial returns of 10.0 per cent. More
recently, Purnanandam and Swaminathan (2004) find
returns ranging from 14.0 to 50.0 per cent depending
on the matching criteria used.
 UNDERPRICING OF INITIAL
PUBLIC OFFERINGS BY
SUPRIYA KATTI
The intricacy of determining the price of
products and services increases with demand
unpredictability. Due to differing perceptions of
the worth of specific goods and services, the
provider would also be compelled to undercut the
price of the goods or services in order to meet the
deadline.
ROHAN GUPTA 22211666
Media sentiment and IPO under pricing
By -Emanuele Bajo and Carlo Raimondo (2016)

They have published about how the media sentiment influences IPO’s and
that positive tones are positively associated with IPO under pricing using a
sample of s 2814 IPOs and 27,309 articles published in U.S. newspapers in
the period 1995–2013 and ASCII- encoded segments (i.e. pdf's, jpg's),
HTML, and XBRL methods are used. The paper showcases how media
presents the information can influence and manipulate the retail investor's
belief and then cause an impact on the investor's behave towards an IPO.
The authors also showcase the positive association with investors when an
is undervalued or under price.
The Impact of Investor Sentiment on IPO Under-pricing
By - Beiyi Chen, et.al (2021)

They have described In this paper, the comprehensive index CICSI to

introduced to represent investor sentiment and iPO under-pricing . Taking
a sample size 2,955 A-share listed stocks from 2003 to 2020 in the Chinese
stock market. The paper also uses an econometric regression model to
conduct the empirical test. The research shows that investor sentiment
has a significant promoting effect on IPO under-pricing. Investors with
optimistic investment sentiment tend to expect the price of IPO stocks to
be much higher than the issue price.
 Investor Sentiment and Pre-Issue Markets
By -Francesca Cornelli, et.ai (2004)

The Authors have made an empirical model to distinguish between

sentiment and rational pricing behaviour and test for the rationality of
small investors and demand for new stock issues using data from pre-
issue or grey markets in Europe. When small investors are excessively
optimistic, they are willing to pay a price above the fundamental value,
resulting in a high aftermarket price. When they are pessimistic, and value
the shares below the fundamental value, they will be priced out of the
market
Exploring the Influence of Investor Sentiment on IPO
Underpricing of Technology Companies
By - M. Schulte

• M. Schulte has used, a sample with high quality data availability,

consisting of 245 technology company IPOs from US stock
exchanges during the time of 2010-2018.

• The research paper gives insight about The hypothesis of

whether IPO under pricing has a relationship with investor
sentiment in technology companies to which the Investor
sentiment has a (positive) relationship with IPO underpricing of
technology companies.
 Shariah vs non-shariah IPO underpricing: evidence from
Indonesia Stock Exchange
By - Syafiq Mahmadah Hanafi and Mamduh M. Hanafi
(2022)

They investigated the effect of shariah status on IPO under-pricing using the
Indonesian stock market performance of shariah and non-shariah IPOs and find
that both shariah and non-shariah IPOs underperform the benchmark, as shown
in the Fama–French three-factor regressions. Shariah IPOs underperform non-
shariah IPOs and investigate the relationship between short and long-term
performance of Shariah IPO’s. The Information was sourced by using open and
closing prices from around 450 Indonesia IPOs from 1990 to 2018. We also
collect information on fundamentals such as total assets, percentage of IPOs the
data was taken from the Indonesian stock exchanges.
RISHI SHARMA 22211664
 HERD BEHAVIOUR AND CAPITAL MARKET

Sagar Varshney, Dr. T. Gurusant, Prof. Kanhaiya Singh

(2020) describe the overview of the existing literature
on herding behaviour in capital markets. Incorporating
more specific details, comparisons, theoretical
grounding, and future research directions will further
strengthen the review's depth, clarity, and impact.
 STRUCTURAL REVIEWS OF INITIAL PUBLIC OFFERINGS: A
PATH AHEAD

Sushila Soriya and Ashok Kumar Meena (2019) describe

how they provides a valuable resource for understanding
the current state of research on IPOs and identifying
potential avenues for future investigation. By building upon
the existing knowledge base and exploring new theoretical
and methodological approaches, researchers can contribute
to a deeper understanding of IPO performance and its
implications for various stakeholders.
 HERD BEHAVIOUR: HOW DECISIVE IS THE
NOISE IN THE NSE AND BSE STOCK MARKETS

Paritosh Chandra Sinha(2016) describes this paper provides

valuable insights into how behavioral factors like herding and
noise influence market behavior, challenging traditional finance
theories and suggesting promising avenues for future research.
 INVESTIGATING INVESTORS' HERD
BEHAVIOR

Bhoomika Trehan and Amit Kumar Sinha (2019) describe the

initial exploration of herding behavior among Indian investors.
Expanding on the methodology, incorporating quantitative data
analysis, and drawing connections to existing research and theory
would significantly enrich the research and solidify its
contribution to the field.
 TRANSPARENCY IN IPO MECHANISM: RETAIL
INVESTORS’ PARTICIPATION, IPO PRICING
AND RETURNS

Suman Neupane and Sunil S. Poshakwale (2012) described

in , this study that offers a valuable contribution to the
understanding of bookbuilding mechanisms and their
implications for different investor groups. It highlights the
importance of transparency for empowering retail investors
while also pointing to the need for further research on their
decision-making processes and performance in IPOs.