Reference price formation under reverse market conditions: Evidence from IPO trading volume

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dc.contributor Aalto University en
dc.contributor Aalto-yliopisto fi Bigler, Anna 2013-01-14T11:34:58Z 2013-01-14T11:34:58Z 2012
dc.description.abstract This thesis studies the reference price formation under reverse market conditions, determined by the prevailing bull and bear sentiment trends. I investigate the turnover changes after initial public offering (IPO), which forms a natural reference point for the investors, to which they compare all forthcoming price movements. The results imply that a stock is traded more when its market price exceeds the offer price, that the investor has initially paid to obtain the asset. Additionally, the IPO stocks that begin trading at a gain, tend to be traded more, as they fall below their initial purchase price for the first time. However, the initially losing stocks are not found to be traded more when their market price surpasses the initial offer price, which is not consistent with previous research. Regarding the effect of the market trends, investors seem to be more optimistic in the formation of their reference prices during bull markets, than during bear conditions. Moreover, new stock price maximums and minimums seem to strongly influence the reference point formation across different market conditions. Under bull circumstances, investors are also more quicker in reacting to new price maximums and minimums, when compared to the bear conditions, under which the reference prices do not seem to be updated as strongly, if at all, to new price crossings. Therefore, it can be interpreted that investors do adapt their notions on winnings and losses based on new information gained from the stock's current market performance, as they tend to wait longer to sell a losing stock and are also more eager to sell the winning stock before it rises any further. Finally, investors seeming to react faster during bull trends can be due to more frequent follow-up of their assets, which has been found characteristic for bull market investors. en
dc.format.extent 98
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.title Reference price formation under reverse market conditions: Evidence from IPO trading volume en
dc.type G2 Pro gradu, diplomityö fi Kauppakorkeakoulu fi School of Business en
dc.contributor.department Department of Finance en
dc.contributor.department Rahoituksen laitos fi
dc.subject.keyword Reference Price Formation
dc.subject.keyword Disposition Effect
dc.subject.keyword Prospect Theory
dc.subject.keyword IPO Under- pricing
dc.subject.keyword Market Trends
dc.subject.keyword Investor Sentiment
dc.subject.keyword Pooled Regression
dc.identifier.urn URN:NBN:fi:aalto-201305163119
dc.type.dcmitype text en
dc.programme.major Finance en
dc.programme.major Rahoitus fi
dc.type.ontasot Master's thesis en
dc.type.ontasot Pro gradu tutkielma fi
dc.subject.helecon rahoitus
dc.subject.helecon financing
dc.subject.helecon hinnat
dc.subject.helecon prices
dc.subject.helecon hinnoittelu
dc.subject.helecon pricing
dc.subject.helecon markkinat
dc.subject.helecon markets
dc.ethesisid 13060 2012-11-29
dc.location P1 I

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