Why investors do not buy cheaper securities: Evidence from a natural experiment
Baolian Wang and
Journal of Banking & Finance, 2019, vol. 101, issue C, 59-76
We examine the trading behavior of Chinese domestic investors after they were given access to the B-share market in 2001. Surprisingly, we find that only 2% of investors began buying B shares. Even among these 2%, investors were less likely to buy B shares if they had more experience in the A-share market, and vice-versa. Thus, prior market experience limits the extent to which investors respond to A/B-share premiums and liquidity and lowers their performance. Our findings cannot be explained by government intervention, investor heterogeneity, foreign currency constraint, A/B-share liquidity or speculation differentials, or information advantage.
Keywords: A/B share prices; Portfolio inertia; Trading experience; Trading performance (search for similar items in EconPapers)
JEL-codes: G11 D03 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:101:y:2019:i:c:p:59-76
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