Overreaction in ChiNext IPOs' initial returns: How much and what caused it?

This paper studies overreaction in initial returns for ChiNext IPOs. We hypothesize the initial return contains a fundamental underpricing and an overreaction. The fundamental is represented by the 21st day return and the difference between the initial and 21st day returns represents overreaction. We investigate this conjecture and identify the variables that are significant for both returns, for one but not for the other, and for the difference. The initial return is driven more by short-term and market factors that cause overreaction while the 21st day return is affected more by an issuer's fundamentals. The overreaction is only weakly time-varying.