The Effects of Removing Price Limits and Term Structure upon Order-Submission Behaviors of IPOs

54 Pages Posted: 21 Aug 2008 Last revised: 2 Dec 2008

See all articles by Peihan Hsin

Peihan Hsin

Cheng Shiu University,Taiwan

Ming-Chang Wang

National Chung Cheng University - Department of Business Administration

Date Written: December 1, 2008

Abstract

This paper analyzes the effects of removing price limits and term structure upon order-submission behaviors in IPOs. Many Emerging markets impose limits on trading prices within a trading day to prevent the market from overreaction, especially in IPOs market. With a sample of Taiwan IPOs, the deregulation of price limits in first five trading days offers us an opportunity to insight into how the price limits affect investors' order behaviors. Besides, two anomalies in the pricing of IPOs are well documented: the short-run underpricing and the long-run overpricing phenomenon. Thus, we propose the term structure effect on order-submission behaviors similar to pricing behaviors in different periods and then examines above effect how to affect order-submission behaviors . Our findings are: (1) the previous information indicators of limit order book significantly affect order aggressiveness of market participants in IPOs market; (2) the term factor slightly affect order submission behaviors; (3) removing price limits decreases the degree of relationship between information contents and order aggressiveness.

Keywords: Initial Public Offerings, State of the Limit Order, Price Limits, Initial Return, Long-Run Performance

JEL Classification: E44, G32, G14, C25, G12

Suggested Citation

Hsin, Peihan and Wang, Ming-Chang, The Effects of Removing Price Limits and Term Structure upon Order-Submission Behaviors of IPOs (December 1, 2008). 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: https://ssrn.com/abstract=1243482 or http://dx.doi.org/10.2139/ssrn.1243482

Peihan Hsin (Contact Author)

Cheng Shiu University,Taiwan ( email )

No. 840, Chengcing Rd.
Taiwan
China
+886-7-7310606 *5039 (Phone)
+886-7-7311482 (Fax)

Ming-Chang Wang

National Chung Cheng University - Department of Business Administration ( email )

402 Taiwan
China

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