Impact of Demand Shocks on the Stock Market: Evidence from Chinese IPO
Prof. Jennifer LI
Assistant Professor of Finance
FBA, UM
Date: 15 November 2023 (Wednesday)
Time: 13:00 to 14:00 pm
Venue: FBA Lobby
Moderator: Prof. Rachel Xiaorong MA, Assistant Professor of Finance
Abstract
We exploit demand shocks created as investor funds are frozen and unfrozen during Chinese IPOs to estimate their impact on the aggregate Chinese stock market. Using brokerage account records, we observe the selling and buying as investors raise cash to subscribe for IPOs and then reinvest the funds that supported unsuccessful subscriptions. Using an instrumental variables estimator, we find that flows have large price impacts, with a 10 bps demand shock increasing the aggregate market level by approximately 40 bps. Our estimates are inconsistent with most rational and behavioral models, but consistent with the recent inelastic markets hypothesis.
Speaker
Dr. Jennifer Li received her Ph.D in Finance from INSEAD. Prior to joining UM, She had worked as an Assistant Professor of Finance at Shanghai Advanced Institute of Finance of Shanghai Jiao Tong University. Jennifer’s research focuses on empirical asset pricing, behavioral finance, mutual funds, financial intermediation, retail investors and institutional investors. Jennifer has published papers in Journal of Financial Economics, and China Journal of Economics.
All are welcome!
