Taking 917 IPO firms from the year 2006 to 2011 as the sample，this paper analyzes how investor sentiment affects stock pricing． Our findings are: 1) both market sentiment and firm specific sentiment significantly affect IPO overvaluation． Specifically，IPO overvaluation is 36% larger in higher groups than lower groups of market sentiment (63% vs 27%) ，and IPO overvaluation is 24% larger in stocks with a higher firm specific sentiment than a lower firm specific sentiment(56% vs 32%) ． 2) The higher the value uncertainty of IPO firms，the larger the effects of investor sentiment on IPO premium; while the higher the speculative risk，the smaller the effects of investor sentiment on IPO premium． 3) With higher IPO premiums，stock prices will reverse gradually after the IPO．