The Correlationship between the First-Day Return and the Investor Sentiment on the GEM Board in China

First-day returns of IPOs on Chinese GEM board are described and examined in this paper, and then the overvaluation is found some way. By selecting agent variables based on the investor sentiment theory, we show the correlation ship between the first-day return and the investor sentiment, and construct the investor sentiment index on the GEM board. Our perspective is threefold: Firstly, on the GEM board, the first-day return of IPOs is positively related to the turnover, the divergence of opinions and the investors' confidence degree. Secondly, the ISI constructed with the three variables above can curve the return quite well. Thirdly, the correlation between the first-day return and the former one is not so significant.