A STUDY ON PREDICTING IPO UNDERPRICING IN INDIA: An Integrated Analysis of Financial Factors and Investor Sentiment

 This paper investigated financial factors, investor sentiment, investor demand and market conditions as correlates of perceived underpricing of IPOs for 19 unique respondents in India. The reliability of all scales was good. Underpricing was positively related to each of financial factors and sentiment, while the investor demand was the most significant factor in perceived underpricing, and the effect of sentiment on underpricing was mediated statistically by demand. All paths were related to market conditions, but this relationship was not moderated by market conditions. An integrated model was useful for respondents and provided a good fit (R2 = .89), but failed to out-predict the single factor models in a cross-validation process. Due to the small sample, outcome being perceived, and uniform-answer respondents, the results should be treated as exploratory and as a foundation for a larger study which would incorporate survey results with actual IPO returns.

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