Investor Herding in the China Stock Market: An Examination of ChiNext

Hui Hong (), Shulin Xu () and Chien-Chiang Lee ()
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Hui Hong: Research Center for Central China Economic and Social Development and School of Economics & Management, Nanchang University, Nanchang, Jiangxi, China
Shulin Xu: School of Economics, Jinan University, Guangzhou, Guangdong, China.

Journal for Economic Forecasting, 2020, issue 4, 47-61

Abstract: This research investigates the presence and the asymmetric effects of investor herding in the ChiNext market over the period from October 30, 2009, to April 30, 2020, providing an interesting setting for herding analysis that has not yet been covered by the literature. We build our methodology based on Christie and Huang (1995) and Chang et al. (2000) and present empirical results showing that herding strongly exists in the market, even after controlling for the effect of COVID-19. The herding behavior also displays asymmetric effects associated with market conditions, industry, and firm size and is more pronounced in an up market and a bearish context, more prevalent in manufacturing and IT sectors, and stronger for large- and small-size portfolios. The results have investment implications for investors who seek out profitable trading opportunities in the China stock markets and policy implications for the China government that is endeavoring to better regulate its domestic financial markets.

Keywords: herding; return dispersion; China stock market; asymmetric effect; ChiNext; A- and B-shares (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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