Positive feedback trading, institutional investors and securities price fluctuation

Yin Hong

China Finance Review International, 2011, vol. 1, issue 2, 120-132

Abstract: Purpose - The purpose of this paper is to research and analyze the influence of institutional investors in the present securities market due to behavior alienation with “running after rising and falling” and “herd behavior”. Design/methodology/approach - A DeLong, Shleifer, Summers, and Waldmann (DSSW) model with positive feedback trading is established first to show the trading process, and these securities prices are calculated considering the investors' emotion. Through numerical analysis, the influence of institutional investors on securities price fluctuation is simulated. Further, the analysis of institutional investors' incomes is processed based on this model. Findings - Through these analyses, the following conclusions are drawn: it lies on the scale of positive feedback traders and their sensitivity to past market performances whether the institutional investors can stabilize the market, and it is not necessary for the institutional investors to benefit from manipulating the market due to the existence of noise trader risk, so the positive feedback traders may survive in the security market over the long term. Originality/value - The DSSW model considering positive feedback trading, presented in the paper, is more effective in analyzing the relation among the behavior of institutional investors, securities pricing and securities price fluctuation. The paper proposes some advice for policy decisions, which is helpful for government and institutions to maintain the stability of securities markets.

Keywords: China; Securities; Stock prices; Investors; Stockholder analysis (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:cfripp:v:1:y:2011:i:2:p:120-132

DOI: 10.1108/20441391111100714

Access Statistics for this article

China Finance Review International is currently edited by Professor Chongfeng Wu and Professor Haitao Li

More articles in China Finance Review International from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().