Abstract
We investigate the daily stock returns of all A-shares listed on the Shanghai and Shenzhen stock exchanges over the period 2010-2017. Using daily cash flow data on the largest category of trades by value, we construct a proxy for high-value institutional trading activity. We demonstrate that high-value institutional transactions consistently exacerbate firm-level abnormal stock returns on extreme market movement days. We then highlight the conflating influence of regulator imposed daily limits on firm-level stock price movements and conclude that binding price limits act to exacerbate the destabilising effects associated with high-value institutional trades in Chinese stock markets.
| Original language | English |
|---|---|
| Article number | 101484 |
| Journal | Pacific-Basin Finance Journal |
| Early online date | 3 Dec 2020 |
| DOIs | |
| Publication status | E-pub ahead of print - 3 Dec 2020 |
Keywords
- price limits
- extreme market swings
- cash flow
- institutional trading behaviour
