Individual versus institutional valuation in IPOs: evidence from primary market

Investors are often assumed to have the ability to make accurate valuations in basic financial theories. Due to the inability to accurately distinguish between individual and institutional investors in the secondary market, we shift the perspective to the primary issuance market. Using IPO data from the Chinese A-share market, this paper shows that individual investors generally deviate in valuation and underperform in long-term investments, while institutional investors do not. Furthermore, we suggest that both the increase in market sentiment and information will negatively affect individual investors' valuation and weaken their long-term holding returns, which is more significant in the Sci-Tech Innovation Board market. In contrast, institutional investors' valuation is almost free from market sentiment and information interference.