Government intervention and institutional trading strategy: Evidence from a transition country

Yi Yao, Rong Yang, Zhiyuan Liu and Iftekhar Hasan

No 9/2012, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: This study investigates the effectiveness of government intervention in rescuing bearish markets in a transition economy. Focusing on a pre- and a post-intervention period, the findings reveal that government intervention successfully rescued bearish markets in China and led to a fundamental change in institutional trading strategy after the intervention. We observe that following an intervention, institutions are more sensitive to long-term stock market regulations, whereas individual investors are more concerned about the rules related to their short-term interests. Evidence suggests that a credible signal from the government can be helpful in creating a positive outcome in the market (Bhanot and Kadapakkam, 2006). The findings are important to the current debate regarding the role of govern-ment intervention in markets in other transitional economies, as well as in developed countries.

Keywords: Government Intervention; Institutional Trading Strategy (search for similar items in EconPapers)
JEL-codes: G15 G18 G32 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Journal Article: Government intervention and institutional trading strategy: Evidence from a transition country (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:bdp2012_009

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