Institutional trading in volatile markets : evidence from Chinese stock markets

Darby, Julia and Zhang, Hai and Zhang, Jinkai (2020) Institutional trading in volatile markets : evidence from Chinese stock markets. Pacific-Basin Finance Journal. 101484. ISSN 0927-538X (https://doi.org/10.1016/j.pacfin.2020.101484)

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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 destabilising effects associated with high-value institutional trades in Chinese stock markets.

ORCID iDs

Darby, Julia ORCID logoORCID: https://orcid.org/0000-0003-4425-7222, Zhang, Hai ORCID logoORCID: https://orcid.org/0000-0001-9319-346X and Zhang, Jinkai;
CORE (COnnecting REpositories)