Institutional trading in volatile markets: Evidence from Chinese stock markets

Julia Darby, Hai Zhang and Jinkai Zhang

Pacific-Basin Finance Journal, 2021, vol. 65, issue C

Abstract: We investigate the daily stock returns of all A-shares listed on the Shanghai and Shenzhen stock exchanges over the period 2010–2017. Using daily cash flow data on the largest category of trades by value, we construct a proxy for high-value institutional trading activity. We demonstrate that high-value institutional transactions consistently exacerbate firm-level abnormal stock returns on extreme market movement days. We then highlight the conflating influence of regulator imposed daily limits on firm-level stock price movements and conclude that binding price limits act to exacerbate the destabilizing effects associated with high-value institutional trades in Chinese stock markets.

Keywords: Extreme market swings; Price limits; Cash flow; Institutional trading behaviour (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:65:y:2021:i:c:s0927538x2030696x

DOI: 10.1016/j.pacfin.2020.101484

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