Asymmetries of Positive Feedback Trading in Individual Stocks: Evidences from China

Die Wan; Weiyi Liu; Junbo Wang; Xiaoguang Yang

doi:10.3724/SP.J.1383.101002

Asymmetries of Positive Feedback Trading in Individual Stocks : Evidences from China

Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review

Overview

11 Scopus Citations

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Author(s)

Die Wan
Weiyi Liu
Junbo Wang
Xiaoguang Yang

Related Research Unit(s)

Department of Economics and Finance

Detail(s)

Original language	English
Pages (from-to)	3-27
Journal / Publication	Journal of Management Science and Engineering
Volume	1
Issue number	1
Online published	30 Sept 2016
Publication status	Published - Dec 2016

Link(s)

DOI	DOI https://doi.org/10.3724/SP.J.1383.101002 Final Published version
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Attachment(s)	Documents 84805334.pdf Final Published version, 566 KB, PDF 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/
Link to Scopus	https://www.scopus.com/record/display.uri?eid=2-s2.0-85037369669&origin=recordpage
Permanent Link	https://scholars.cityu.edu.hk/en/publications/publication(89e9b99f-06bc-448e-82cf-71aa479f32c1).html

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.

Research Area(s)

Asymmetry, Index, Individual stocks, Positive feedback trading, Retail investor

Bibliographic Note

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