Underpricing Process of IPOs in Tunis Stock Exchange: An Agent-Based Modelling Approach

Abstract

The fundamental problematic treated in our study was an attempt to explain an anomaly in the issuance of new stocks in IPOs process. The objective of this research is to analyze the effect of certain variables on the level of undervaluation by presenting certain econometric models issued from Agent-based modelling approach. Certain variables can be predictive of the phenomenon of undervaluation such as: the Stock equity distributed to institutional investors, liquidity in the secondary market measured by the price range and the type of investor who can be insiders or outsiders, in addition to these variables we have introduced some control variables which in turn help explain the level of underpricing and which are the age of the company, its size and dimension, the volume of trade and the volatility. Empirically and based on a sample of 16 companies, we were able to respond to our problematic. In fact, according to the hypotheses tests, the prices of the newly introduced stocks on the stock exchange are mostly undervalued which were aligned with our study. Thereby, the methodology adopted based to Dynamic linear models (DLM) that allows offering a very generic framework to analyse time series data. The results of this research were, in part, consistent with work done in developed countries (especially in USA and Europe). Indeed, the undervaluation is in a positive relationship with certain explanatory variables such as the Institutional ownership (INST), Insiders ownership (INSID), Price range (FOUR), etc. On the other hand, we were able to identify significant negative relationships between the initial undervaluation and the basic variable Outsiders ownership (OUTSID), the size of companies listed on the Tunis Stock exchange (BVMT) and the volume of issued stocks.