 Asymmetric positive feedback trading and stock pricing in ChinaXufeng Liu and Die Wan The North American Journal of Economics and Finance, 2022, vol. 60, issue C Abstract: Defining asymmetry of feedback trading (AFC) as the difference between buying-winners and selling-losers intensities, the paper investigates if AFC impacts stock pricing. We show that buying stocks with low AFC and selling stocks with high AFC makes significant positive returns after controlling traditional pricing factors. The return mainly comes from the long leg and cannot be simply attributed to either mispricing, liquidity, or risk premium. Further study shows that the negative impact of AFC on future stock return is reinforced with an increase in past returns, maximum daily return, relative valuation level, asset growth rate, or operating profit rate. As AFC represents retail trading intensity, the results imply that the inactiveness of retail investors may make price relative underreaction to good news and thus lead to positive expected stock return. Keywords: Asymmetric positive feedback trading; Retail trading; Stock pricing; Inactiveness; Underreaction; China (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:ecofin:v:60:y:2022:i:c:s1062940822000183 DOI: 10.1016/j.najef.2022.101658 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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