Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach
Joint Authors
Source
Discrete Dynamics in Nature and Society
Issue
Vol. 2016, Issue 2016 (31 Dec. 2016), pp.1-13, 13 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2016-06-13
Country of Publication
Egypt
No. of Pages
13
Main Subjects
Abstract EN
The net roadshow has been dominant in China’s IPO (initial public offerings) roadshow structure.
Considering the dynamic game with incomplete information between the issuer and investor during China’s IPO net roadshow, the quality of the letter of intent is presented as a discrete signal in this paper in accordance with China’s IPO net roadshow characteristics.
A signaling game model is established to conclude the issuer’s equilibrium signal and the investor’s purchase action.
The issuer disguised a letter of intent to uplift its quality if the disguising cost per share stands below the bidding spread.
If the investor judges the letter of intent as high-quality, the basis of purchase is that the opportunity cost per share is less than the expectation on the intrinsic value of the IPO stock.
Otherwise the investor rejects purchasing on the condition that the opportunity cost outnumbers the valuation of intrinsic value.
In conclusion, there exist unique separating equilibrium and pooling equilibrium as a perfect Bayesian Nash equilibrium, and the existence and uniqueness of their equilibrium domains have been verified by numerical simulation.
Finally, the comprehensive empirical studies have validated only one separating and pooling equilibrium existing in China’s real-world IPO market.
American Psychological Association (APA)
Zhao, Yi& Li, Dong. 2016. Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach. Discrete Dynamics in Nature and Society،Vol. 2016, no. 2016, pp.1-13.
https://search.emarefa.net/detail/BIM-1103517
Modern Language Association (MLA)
Zhao, Yi& Li, Dong. Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach. Discrete Dynamics in Nature and Society No. 2016 (2016), pp.1-13.
https://search.emarefa.net/detail/BIM-1103517
American Medical Association (AMA)
Zhao, Yi& Li, Dong. Equilibrium Signal and Purchase Decision in China’s IPO Net Roadshow: A Dynamic Game Approach. Discrete Dynamics in Nature and Society. 2016. Vol. 2016, no. 2016, pp.1-13.
https://search.emarefa.net/detail/BIM-1103517
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1103517