When Will Investors Herd?--Evidence from the Chinese Stock Markets
The institutional characteristics of the Chinese stock markets provide a unique perspective to study the herding behavior of investors. If domestic investors are more knowledgeable or informed about individual stocks than foreign investors, herding behavior is most likely to occur among foreign investors. Our empirical results indicate that during periods of extreme price movements, the relative equity return dispersions for both Shanghai-B and Shenzhen-B actually have decreased, which provides evidence for herd behavior. This result is robust to a different specification which controls for informational trading. However, for both Shanghai-A and Shenzhen-A, we find mixed and weaker results to support for herding. Since B-share investors are foreign investors, the differential herding behavior of local and foreign investors suggest that in the presence of inefficient information disclosure, foreign participants tend to trade according to other signals and to herd due to lack of fundamental and private information on firms. We also propose an alternative approach that involves trading volume to detect herding behavior. After controlling for informational effect, we continue to find strong support for herding activities in the B-share markets. Our findings are robust in terms of portfolio size, industry grouping, and GARCH specifications.
Cross-sectional Dispersion GARCH Herding behavior Momentum Trading Volume
Gongmeng Chen Oliver M. Rui Yexiao Xu
School of Accounting and Finance at the Hong Kong Polytechnic University Faculty of Business Administration of The Chinese University of Hong Kong School of Management the University of Texas at Dallas Richardson, TX 75083
国际会议
西安
英文
1-41
2006-07-17（万方平台首次上网日期，不代表论文的发表时间）