Abstract
The paper investigates the positive feedback trading phenomenon of individual stocks in China's stock market. Heterogeneous regression models and a non-parametric Sentana-Wadhwani model are developed and applied to prove the existence of rise-favor asymmetric feedback trading. This result is consistent with the reality of China's stock market, that is, the herding behavior of irrational retail investors has a significant influence on the market. However, the result is in contrast with the stylized findings using market indices. Further empirical research shows that this distinction could be explained by the average effect of indices. The asymmetries of positive feedback trading caused by heterogeneous feedback trading and the uneven distributed retail trading in individual stocks, are covered by the weighted average effect in indices. Therefore, the indices exhibit a different asymmetric pattern from that of individual stocks.
| Original language | English |
|---|---|
| Pages (from-to) | 3-27 |
| Journal | Journal of Management Science and Engineering |
| Volume | 1 |
| Issue number | 1 |
| Online published | 30 Sept 2016 |
| DOIs | |
| Publication status | Published - Dec 2016 |
Research Keywords
- Asymmetry
- Index
- Individual stocks
- Positive feedback trading
- Retail investor
Publisher's Copyright Statement
- This full text is made available under CC-BY-NC-ND 4.0. https://creativecommons.org/licenses/by-nc-nd/4.0/
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