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Price Elasticity of Demand for Common Stock in A-share Market:An Empirical Study on Full-circulation IPO Lock-up Period Expiration

ZHAO Zibing CHEN Jinming WEI Xinjiang  
The paper empirically studies 432 samples of lock-up period expiration of 265 companies' IPO after full-circulation offering of A-share.A notable price-volume effect is found before and after the day of expiration: from the day of T-8 to T+2,the average cumulated abnormal return is -2.3%and no reverse is seen in the next two months whereas 33.2%permanent abnormal trading volume is found after the day of expiration.The authors set up a modified model that contains a liquidity effect variable to amend the traditional single-variable model.And it is proved that the empirical result backs this new model.The estimated elasticity of A-share demand is -52.73,which indicates the curve of stock demand is relatively flat and a remarkable price fall will not be caused by pure supply factor,as the non-tradable shares are free for circulation on the market.
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