Optimism in foreign investors

Meziane Lasfer, Sharon Xiaowen Lin and Yaz Muradoglu

Review of Behavioral Finance, 2012, vol. 4, issue 1, 8-27

Abstract: Purpose - The purpose of this paper is to compare the short‐term trading behaviour of A shares owned by domestic investors and their dually‐traded B shares owned by foreign investors, after a period of significant price change. Design/methodology/approach - Given that the fundamentals of A and B shares are the same, the paper tests the hypothesis that both types of stocks should behave homogeneously either by exhibiting a momentum behaviour or an over‐reaction pattern. The paper relates any deviations in post‐shock stock returns to the differences in the trading patterns of foreign relative to domestic investors. Findings - While the prices of the A shares are relatively random after the event, those of the B shares carry on increasing significantly after both positive and negative shocks. This trend is more pronounced for large firms with high liquidity, in contrast to the efficient market hypothesis expectations, which suggests that any abnormal performance should be arbitraged away sooner in a frictionless (in this case liquid) market. Originality/value - The paper relates these results to the high level of optimism of foreign investors, which is an under‐researched area in behaviour finance.

Keywords: Efficient markets; Market stress; Optimism; Foreign investor behaviour; Dual listed shares; Investors; Trade; Stocks (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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:rbfpps:v:4:y:2012:i:1:p:8-27

DOI: 10.1108/19405971211261083

Access Statistics for this article

Review of Behavioral Finance is currently edited by Professor Gulnur Muradoglu

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