Differences in the effects of seller-initiated versus buyer-initiated crowded trades in stock markets

Liyun Zhou () and Chunpeng Yang ()
Additional contact information
Liyun Zhou: South China Agricultural University
Chunpeng Yang: South China University of Technology

Journal of Economic Interaction and Coordination, 2019, vol. 14, issue 4, No 8, 859-890

Abstract: Abstract This paper illustrates the differences in the effects of seller-initiated versus buyer-initiated crowded trades in stock markets. First, a one-period multi-investor model is proposed to describe how crowded trades affect stock prices. Further, we theoretically decompose the crowded trades into buyer-initiated crowded trades and seller-initiated crowded trades and, respectively, analyse their effects on stock prices. An empirical study is conducted to examine the theoretical model, obtaining the following results. First, stock prices increase with crowded trades; second, stock prices are positively related to buyer-initiated crowded trades, but negatively related to seller-initiated crowded trades; and third, the effects of crowded trades, buyer-initiated crowded trades and seller-initiated crowded trades on stock prices are stronger for the younger stocks, lower price earnings ratio stocks, lower earnings per share stocks, and lower fixed asset ratio stocks. Collectively, our results can provide new insights into the roles of crowded trades on stock prices.

Keywords: Crowded trades; Buyer-initiated crowded trades; Seller-initiated crowded trades; Stock prices (search for similar items in EconPapers)
JEL-codes: G1 G10 G12 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11403-019-00264-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:jeicoo:v:14:y:2019:i:4:d:10.1007_s11403-019-00264-3

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11403/PS2

DOI: 10.1007/s11403-019-00264-3

Access Statistics for this article

Journal of Economic Interaction and Coordination is currently edited by A. Namatame, Thomas Lux and Shu-Heng Chen

More articles in Journal of Economic Interaction and Coordination from Springer, Society for Economic Science with Heterogeneous Interacting Agents Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().