 Herding and China's market-wide circuit breakerXinru Wang, Maria H. Kim and Sandy Suardi Journal of Banking & Finance, 2022, vol. 141, issue C Abstract: China stock market regulators implemented market-wide circuit breakers when the market crash was imminent on the 4th of January 2016. This paper examines whether traders’ herding behaviour led to the circuit breaker trigger and limited success in moderating market reaction. Using intraday data, we show extensive herding in the pre-halt and post-halt periods on the event day. We find herding and excessive market volatility are mutually causative. Importantly, we identify herding stems from both market sentiments and fundamentals around the circuit breaker trigger. In a market dominated by individual investors, non-fundamental herding primarily characterises the Chinese stock market. Nonetheless, the uncertain and disruptive impact of the circuit breaker led to massive and rapid stocks sale underlying the fundamental herding. Investors trade in the direction of the crowd giving rise to self-enforced herding and greater market volatility, and culminating in the circuit breaker trigger. Keywords: Circuit breaker; Non-fundamental herding; China; Stock market crisis; Herding behavior (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:141:y:2022:i:c:s0378426622001273 DOI: 10.1016/j.jbankfin.2022.106533 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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