Institutional trading in volatile markets: evidence from Chinese stock markets

Research output: Contribution to conferencePaper

Abstract

We investigate all listed firms in Shanghai and Shenzhen stock Exchanges on extreme market movement days over 2010 to 2017, and highlight the important role of price limit on post extreme day stock returns. Utilising daily cash flow data of the largest trading group as a proxy of institutional investors trading behaviour, we identify institutional investors’ consistently destabilizing effects on extreme days across two markets. We further show the upper (lower) price limit hitting stocks continue to increase (decrease) for at least two subsequent days, and find evidence of long run price reversal for lower hitting stocks. Finally we find the greater net buy by large traders the higher abnormal return in three subsequent days of the upper price limit hitting regular stocks, while the net sell on extreme days tend to predict the positive subsequent abnormal returns.

Conference

ConferenceThe 6th Young Finance Scholars' Conference
CountryUnited Kingdom
CityBrighton
Period14/06/1914/06/19

Fingerprint

Chinese stock market
Price limits
Institutional trading
Abnormal returns
Institutional investors
Traders
Trading behavior
Stock returns
Stock exchange
Shenzhen
Price reversal
Shanghai
Cash flow

Keywords

  • extreme market swings
  • price limits
  • cash flow
  • institutional trading behaaviour
  • Chinese stock markets
  • investors

Cite this

Darby, J., Zhang, H., & Zhang, J. (2019). Institutional trading in volatile markets: evidence from Chinese stock markets. Paper presented at The 6th Young Finance Scholars' Conference, Brighton, United Kingdom.
Darby, Julia ; Zhang, Hai ; Zhang, Jinkai. / Institutional trading in volatile markets : evidence from Chinese stock markets. Paper presented at The 6th Young Finance Scholars' Conference, Brighton, United Kingdom.
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abstract = "We investigate all listed firms in Shanghai and Shenzhen stock Exchanges on extreme market movement days over 2010 to 2017, and highlight the important role of price limit on post extreme day stock returns. Utilising daily cash flow data of the largest trading group as a proxy of institutional investors trading behaviour, we identify institutional investors’ consistently destabilizing effects on extreme days across two markets. We further show the upper (lower) price limit hitting stocks continue to increase (decrease) for at least two subsequent days, and find evidence of long run price reversal for lower hitting stocks. Finally we find the greater net buy by large traders the higher abnormal return in three subsequent days of the upper price limit hitting regular stocks, while the net sell on extreme days tend to predict the positive subsequent abnormal returns.",
keywords = "extreme market swings, price limits, cash flow, institutional trading behaaviour, Chinese stock markets, investors",
author = "Julia Darby and Hai Zhang and Jinkai Zhang",
year = "2019",
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day = "14",
language = "English",
note = "The 6th Young Finance Scholars' Conference ; Conference date: 14-06-2019 Through 14-06-2019",

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Darby, J, Zhang, H & Zhang, J 2019, 'Institutional trading in volatile markets: evidence from Chinese stock markets' Paper presented at The 6th Young Finance Scholars' Conference, Brighton, United Kingdom, 14/06/19 - 14/06/19, .

Institutional trading in volatile markets : evidence from Chinese stock markets. / Darby, Julia; Zhang, Hai; Zhang, Jinkai.

2019. Paper presented at The 6th Young Finance Scholars' Conference, Brighton, United Kingdom.

Research output: Contribution to conferencePaper

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T1 - Institutional trading in volatile markets

T2 - evidence from Chinese stock markets

AU - Darby, Julia

AU - Zhang, Hai

AU - Zhang, Jinkai

PY - 2019/6/14

Y1 - 2019/6/14

N2 - We investigate all listed firms in Shanghai and Shenzhen stock Exchanges on extreme market movement days over 2010 to 2017, and highlight the important role of price limit on post extreme day stock returns. Utilising daily cash flow data of the largest trading group as a proxy of institutional investors trading behaviour, we identify institutional investors’ consistently destabilizing effects on extreme days across two markets. We further show the upper (lower) price limit hitting stocks continue to increase (decrease) for at least two subsequent days, and find evidence of long run price reversal for lower hitting stocks. Finally we find the greater net buy by large traders the higher abnormal return in three subsequent days of the upper price limit hitting regular stocks, while the net sell on extreme days tend to predict the positive subsequent abnormal returns.

AB - We investigate all listed firms in Shanghai and Shenzhen stock Exchanges on extreme market movement days over 2010 to 2017, and highlight the important role of price limit on post extreme day stock returns. Utilising daily cash flow data of the largest trading group as a proxy of institutional investors trading behaviour, we identify institutional investors’ consistently destabilizing effects on extreme days across two markets. We further show the upper (lower) price limit hitting stocks continue to increase (decrease) for at least two subsequent days, and find evidence of long run price reversal for lower hitting stocks. Finally we find the greater net buy by large traders the higher abnormal return in three subsequent days of the upper price limit hitting regular stocks, while the net sell on extreme days tend to predict the positive subsequent abnormal returns.

KW - extreme market swings

KW - price limits

KW - cash flow

KW - institutional trading behaaviour

KW - Chinese stock markets

KW - investors

M3 - Paper

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Darby J, Zhang H, Zhang J. Institutional trading in volatile markets: evidence from Chinese stock markets. 2019. Paper presented at The 6th Young Finance Scholars' Conference, Brighton, United Kingdom.