An investigation of stock market volatility in Chinese stock markets and the effects of institutional investors

  • Jinkai Zhang

Student thesis: Doctoral Thesis


This thesis contributes to the literature on the investigation of stock market volatility in Chinese stock markets and the effects of institutional investors.;Chapter 2 focuses on the key characteristics of China's stock market that the volatility of stock returns tends to be greater, and to persist for longer, than is typical in 'western' markets. We provide persuasive arguments and evidence in support of the view that volatility persistence in part reflects the opacity of the information environment the majority of investors operate within. We go on to show that continuing reforms of state ownership and control, along with growth in the proportion of shares held by active institutional investors, look to be promising ways to mitigate the persistence in China's stock market volatility going forward.;Chapter 3 investigates the trading behaviour of institutional investors on extreme market movement days. Using daily cash flow data on the largest category of trades by value we construct a proxy for institutional trading and demonstrate that institutional trading behaviour consistently destabilizes both markets on extreme market movement days. We go on to highlight the conflating influence of regulator imposed daily limits to individual stocks' price movements. We conclude that binding price limits act to exacerbate the destabilising effects of institutional trading in Chinese stock markets.;Chapter 4 disaggregates the volatility of common stocks at the market, industry and firm levels by using daily stock return data of all listed firms in Chinese stock market. We find the time-series behaviour of idiosyncratic volatility in Chinese stock market is associated with large stock trading activities by institutional investors. Finally, we provide new evidence from industry-level study and show that much of the idiosyncratic volatility is concentrated in China's manufacturing industry, which is a leading indicator of the idiosyncratic volatility in other individual industries.
Date of Award27 Jul 2020
Original languageEnglish
Awarding Institution
  • University Of Strathclyde
SponsorsUniversity of Strathclyde
SupervisorJulia Darby (Supervisor) & Hai Zhang (Supervisor)

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