Ease-of-processing heuristics and asset prices: Evidence from the exchange-traded repo market in China

Xuyun Fang, Zhiqian Jiang, Baixiao Liu, John J. McConnell and Mingshan Zhou

Journal of Financial Markets, 2022, vol. 59, issue PB

Abstract: Prior to May 22, 2017, price information displayed on stock exchanges on certain days and on days prior to market-closed holidays required investors in exchange-traded repos to infer repos' actual maturities to place orders at appropriate rates. Repo rates on these days exhibited remarkable seasonalities. On May 22, 2017, the displayed information was modified so investors no longer had to infer actual maturities. Thereafter, the seasonalities disappeared. We ascribe the seasonalities to investors employing an ease-of-processing heuristic that failed to decipher repos’ actual maturities. Disappearance of the mispricing gives greater assurance to investors of securing competitive repo rates.

Keywords: Cognitive biases; Ease-of-processing heuristic; Seasonalities; Exchange-traded repo (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1386418121000380
Full text for ScienceDirect subscribers only

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:eee:finmar:v:59:y:2022:i:pb:s1386418121000380

DOI: 10.1016/j.finmar.2021.100656

Access Statistics for this article

Journal of Financial Markets is currently edited by B. Lehmann, D. Seppi and A. Subrahmanyam

More articles in Journal of Financial Markets from Elsevier
Bibliographic data for series maintained by Catherine Liu ().