Large transactions and the MAX effect: Evidence from China

Jia Bi, Pingshu Gui and Yifeng Zhu

Pacific-Basin Finance Journal, 2022, vol. 75, issue C

Abstract: In this paper, we confirm the existence of the maximum daily return (MAX) effect in the Chinese stock market. Furthermore, we find that MAX is driven by large transactions whereby their increasing relative transaction volume triggers the MAX effect. This paper proposes the economic mechanism for the MAX effect as follows: institutional investor trading increases first, which causes individual investors to follow so that the total transaction volume increased, finally the MAX effect formatted. After the daily stock return reaches its monthly highest, the institutional trading quickly decays. By contrast, trading by retail investors decreases much slower after the MAX day.

Keywords: The MAX effect; Large transactions; Institutional investors; Retail investors (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:75:y:2022:i:c:s0927538x22001470

DOI: 10.1016/j.pacfin.2022.101852

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