The impact of closing mechanism changes: evidence from the Shanghai stock market

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dan Ma ◽  
Chunfeng Wang ◽  
Zhenming Fang ◽  
Ziwei Wang
Keyword(s):  
Stock Market ◽  
Market Quality ◽  
Market Manipulation ◽  
Trading Behavior ◽  
Content Type ◽  
Price Manipulation ◽  
Closing Price ◽  
Investor Trading ◽  
The Impact ◽  
Closing Mechanism

PurposeThe purpose of this paper is to empirically examine the impact of closing mechanism changes on market quality, investor trading behavior and market manipulation in the Shanghai stock market.Design/methodology/approachA dummy variable is constructed indicating whether the closing mechanism is call auction or continuous auction. Market quality is measured from aspects of liquidity, volatility and price continuity; investor trading behavior is scaled by order timing and order aggressiveness, and a price deviation indicator is the proxy of manipulation. Using panel regression, this study examines the impact of closing mechanism changes based on intraday transaction data from the Shanghai stock market.FindingsThe conclusions are as follows: First, market quality improves after the closing mechanism is reformed in terms of liquidity, volatility and price continuity. Second, order strategy changes significantly in the closing call market, and investors trade more aggressively in the continuous trading period before closing. Third, the closing call mechanism restrains the closing price manipulation and thus prompts an efficient closing price.Originality/valueThis paper examines the policy effects of closing mechanism changes from aspects of market quality, trading behavior and price manipulation, providing pieces of evidence for trading mechanism design and market supervision in emerging markets.

Investor attention and market correction

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zhongdong Chen
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Trading Behavior ◽  
Investor Attention ◽  
Information Effect ◽  
Content Type ◽  
Economic Significance ◽  
New Information ◽  
Positive Volume ◽  
The Impact

PurposeThis study disentangles the investor-base effect and the information effect of investor attention. The former leads to a larger investor base and higher stock returns, while the latter facilitates the dissemination of information among investors and impacts informational trading.Design/methodology/approachUsing positive volume shocks as a proxy for increased investor attention, this study evaluates the impacts of the investor-base effect and the information effect of investor attention on market correction following extreme daily returns in the US stock market from 1966 to 2018.FindingsThis study finds that the investor-base effect increases subsequent returns of both daily winner and daily loser stocks. The information effect leads to economically less significant return reversals for both the daily winner and daily loser stocks. These two effects tend to have economically more significant impacts on the daily loser stocks. The economic significance of these two effects is also related to firm size and the state of the stock market.Originality/valueThis study is the first to disentangle the investor-base effect and the information effect of increased investor attention. The evidence that the information effect facilitates the dissemination of new information and impacts stock returns contributes to the strand of studies on the impact of investor attention on market efficiency. This evidence also contributes to the strand of studies analyzing the impact of informational trading on stock returns. In addition, this study provides evidence for market overreaction and the subsequent correction. The results for up and down markets contribute to the literature on the investors' trading behavior.

Does investor personality moderate the relationship between information sources and trading behavior? Evidence from Chinese stock market

2017 ◽  
Vol 43 (5) ◽  
pp. 545-566 ◽  
Author(s):  
Muhammad Zubair Tauni ◽  
Zia-ur-Rehman Rao ◽  
Hong-Xing Fang ◽  
Minghao Gao
Keyword(s):  
Stock Market ◽  
Personality Traits ◽  
Chinese Stock Market ◽  
Sources Of Information ◽  
Trading Behavior ◽  
Content Type ◽  
Trading Frequency ◽  
Word Of Mouth Communication ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to investigate the impact of the key sources of information, namely, financial advice, word-of-mouth communication and specialized press, on trading behavior of Chinese stock investors. The study also analyzed if the association between the key sources of information and trading behavior is influenced by investor personality. Design/methodology/approach The authors adopted the Big Five personality framework and examined the survey results of individual stock investors (n=541) in China. Personality traits of investors were measured by the NEO-Five Factor Inventory (Costa and McCrae, 1989). The authors performed probit regression analysis to evaluate the moderating influence of investor personality traits on the association between sources of information and stock trading behavior. Findings The results of the study confirm the previous findings that the key sources of information used by investors as a foundation of their financial choices have a significant influence on their trading behavior. The study also provides empirical evidence that investor personality traits moderate the relationship between the key sources of information and trading behavior. Financial advisors tend to increase the frequency of trading in investors with openness, extraversion, neuroticism and agreeableness personality traits, and tend to decrease the intensity of trading in investors with conscientiousness trait. On the other hand, financial information acquired from word-of-mouth communication is more likely to enhance trading frequency in extraverted and agreeable investors, and is more likely to reduce trading frequency in investors with openness, conscientiousness and neuroticism traits. Finally, the use of specialized press leads to more adjustment in portfolios of the investors with openness and conscientiousness traits than those with other personality traits. An alternative mediated model was not supported. Originality/value This research contributes to information search literature and behavioral finance literature and provides empirical evidence that the psychological characteristics of investors are significant predictors of the variations in information-trading link. The study offers new theoretical insights of investors’ behavior due to the characteristics of Chinese stock market which are unique from other stock markets in the world. To the authors’ best knowledge, no previous study has been conducted so far in Chinese stock market to explore variations with regards to the impact of the key sources of information on trading behavior by the Big Five investor personality and this paper seeks to fill this gap.

scholarly journals The impact of stock market manipulation on Nigeria’s economic performance

2020 ◽  
Vol 9 (1) ◽  
Author(s):  
Babatunde Akinmade ◽  
Festus Fatai Adedoyin ◽  
Festus Victor Bekun
Keyword(s):  
Stock Market ◽  
Economic Performance ◽  
Market Manipulation ◽  
The Impact

A quantile regression approach to evaluate the relative impact of global and local factors on the MENA stock markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Slah Bahloul ◽  
Nawel Ben Amor
Keyword(s):  
Stock Market ◽  
Quantile Regression ◽  
Stock Returns ◽  
Stock Markets ◽  
Financial Integration ◽  
Ordinary Least Squares ◽  
Market Returns ◽  
Stock Market Returns ◽  
Content Type ◽  
The Impact

PurposeThis paper investigates the relative importance of local macroeconomic and global factors in the explanation of twelve MENA (Middle East and North Africa) stock market returns across the different quantiles in order to determine their degree of international financial integration.Design/methodology/approachThe authors use both ordinary least squares and quantile regressions from January 2007 to January 2018. Quantile regression permits to know how the effects of explanatory variables vary across the different states of the market.FindingsThe results of this paper indicate that the impact of local macroeconomic and global factors differs across the quantiles and markets. Generally, there are wide ranges in degree of international integration and most of MENA stock markets appear to be weakly integrated. This reveals that the portfolio diversification within the stock markets in this region is still beneficial.Originality/valueThis paper is original for two reasons. First, it emphasizes, over a fairly long period, the impact of a large number of macroeconomic and global variables on the MENA stock market returns. Second, it examines if the relative effects of these factors on MENA stock returns vary or not across the market states and MENA countries.

scholarly journals Loss aversion, overconfidence of investors and their impact on market performance evidence from the US stock markets

2020 ◽  
Vol 25 (50) ◽  
pp. 451-478
Author(s):  
Ahmed Bouteska ◽  
Boutheina Regaieg
Keyword(s):  
Stock Market ◽  
Economic Performance ◽  
Loss Aversion ◽  
Market Performance ◽  
Ordinary Least Squares ◽  
Company Performance ◽  
Service Firms ◽  
Content Type ◽  
The Us ◽  
The Impact

Purpose The current study aims to investigate the impacts of two behavioral biases, namely, loss aversion and overconfidence on the performance of US companies. First, the impact of loss aversion on the economic performance of companies was assessed. Second, the impact of overconfidence on market performance was discussed. Design/methodology/approach This study used around 6,777 quarterly observations on the population of US-insured industrial and services companies over the 2006-2016 period. Ordinary least squares (OLS) regression in two panel data models were used to test the hypotheses formulated for the study. Findings It was documented that the loss-aversion bias negatively affects the economic performance of companies and this is achieved for both sectors. In contrast, the findings suggest that overconfidence positively affects market performance of industrial firms but negatively affects market performance in service firms. Further robust evidence was found that overconfidence bias seems to be dominant, and hence, investors may tend to be more overconfident rather than more loss-averse. Originality/value This research can be extended by focusing on the following question: What is the impact of the contradictory (positive and negative) effects of an investor's loss aversion and overconfidence on the US company performance in case of realization of a stock market crisis or stock market crash?

Islamic calendar and stock market behaviour in India

2018 ◽  
Vol 45 (11) ◽  
pp. 1550-1566
Author(s):  
Dharani Munusamy
Keyword(s):  
Stock Market ◽  
Least Square Method ◽  
Least Square ◽  
Stock Market Returns ◽  
Content Type ◽  
Ordinary Least Square ◽  
Average Return ◽  
Year Effect ◽  
The Common ◽  
The Impact

Purpose The purpose of this paper is to examine the behavior of the stock market returns in the different days of the week and different months of the year in accordance with the Islamic calendar. Further, the study estimates the risk-adjusted returns to test the performance of the indices during the Ramadan and non-Ramadan days. Finally, the study investigates the impact of Ramadan on the returns and the volatility of the stock market indices in India. Design/methodology/approach Initially, the study applies the Ordinary Least Square method to test the day-of-the-week and the month-of-the-year effect of the common and Shariah indices. Next, the study employs the risk-adjusted measurement to examine the underperformance and over-performance of the indices for both the periods. Finally, the study estimates the GARCH (1,1) and GJR-GARCH (1,1) models to observe the impact of Ramadan on the returns and the volatility of the Shariah indices in India. Findings The study finds that an average return of the indices during the Ramadan days are higher than non-Ramadan days. Further, the average returns of the Shariah indices are significantly higher on Wednesday than other days of the week. In addition, the highest and significant mean returns and mean risk-adjusted returns of the indices during the Ramadan days are observed. Finally, the study finds an evidence of the Ramadan effect on the returns and volatility of the indices in India. Originality/value The study observes evidence that the Ramadan effect influences the Shariah indices, but not the common indices in the stock market of the non-Muslim countries. It indicates that the Ramadan creates the positive mood and emotions in the investors buying and selling activities. The study suggests that investors can buy the shares before Ramadan period and sell them during the Ramadan days to get an abnormal return in the emerging markets.

Do Indian stock market sentiments impact contemporaneous returns?

2018 ◽  
Vol 7 (3) ◽  
pp. 332-346
Author(s):  
Divya Aggarwal ◽  
Pitabas Mohanty
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Temporal Dynamics ◽  
Stock Exchange ◽  
Principal Component ◽  
Stock Index ◽  
Content Type ◽  
Investor Sentiments ◽  
Indian Stock Market ◽  
The Impact

Purpose The purpose of this paper is to analyse the impact of Indian investor sentiments on contemporaneous stock returns of Bombay Stock Exchange, National Stock Exchange and various sectoral indices in India by developing a sentiment index. Design/methodology/approach The study uses principal component analysis to develop a sentiment index as a proxy for Indian stock market sentiments over a time frame from April 1996 to January 2017. It uses an exploratory approach to identify relevant proxies in building a sentiment index using indirect market measures and macro variables of Indian and US markets. Findings The study finds that there is a significant positive correlation between the sentiment index and stock index returns. Sectors which are more dependent on institutional fund flows show a significant impact of the change in sentiments on their respective sectoral indices. Research limitations/implications The study has used data at a monthly frequency. Analysing higher frequency data can explain short-term temporal dynamics between sentiments and returns better. Further studies can be done to explore whether sentiments can be used to predict stock returns. Practical implications The results imply that one can develop profitable trading strategies by investing in sectors like metals and capital goods, which are more susceptible to generate positive returns when the sentiment index is high. Originality/value The study supplements the existing literature on the impact of investor sentiments on contemporaneous stock returns in the context of a developing market. It identifies relevant proxies of investor sentiments for the Indian stock market.

scholarly journals What does corporate social advocacy signal? Evidence from boycott participation decisions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Pyemo N. Afego ◽  
Imhotep P. Alagidede
Keyword(s):  
Content Analysis ◽  
Stock Market ◽  
Event Study ◽  
Market Valuation ◽  
Social Advocacy ◽  
Content Type ◽  
Political Issues ◽  
Stock Market Valuation ◽  
Corporate Social ◽  
The Impact

PurposeThis paper explores how a firm's public stand on a social-political issue can be a salient signal of the firm's values, identity and reputation. In particular, it investigates how boycott participation–conceptualized as a cue of a corporation's stand on important social-political issues–may affect the stock market valuation of that corporation, as well as how corporations legitimise their stand on the issues.Design/methodology/approachThe authors employ a mixed-methods design that uses both qualitative techniques (content analysis) and quantitative methods (event study methodology) to examine a sample of US firms who participated in a boycott campaign that sought to call attention to issues of hate speech, misinformation and discriminatory content on social media platform Facebook.FindingsFindings from the qualitative content analysis of company statements show that firms legitimise their stand on, and participation in, the boycott by expressing altruistic values and suggesting to stakeholders that their stand aligns not only with organizational values/convictions but also with the greater social good. Importantly, the event study results show that firms who publicly announced their intention to participate in the boycott, on average, earn a statistically significant positive abnormal stock return of 2.68% in the four days immediately after their announcements.Research limitations/implicationsFindings relate to a specific case of a boycott campaign. Also, the sample size is limited and restricted to US stocks. The signalling value of corporate social advocacy actions may vary across countries due to institutional and cultural differences. Market reaction may also be different for issues that are more charged than the ones examined in this study. Therefore, future research might investigate other markets, use larger sample sizes and consider a broader range of social-political issues.Practical implicationsThe presence of significant stock price changes for firms that publicly announced their decision to side with activists on the issue of hate propaganda and misinformation offers potentially valuable insights on the timing of trades for investors and arbitrageurs. Insights from the study also provide a practical resource that can be used to inform organizations' decision-making about such issues.Social implicationsTaking the lead to push on social-political issues, such as hate propaganda, discrimination, among others, and communicating their stands in a way that speaks to their values and identity, could be rewarding for companies.Originality/valueThis study provides novel evidence on the impact that corporate stances on important social-political issues can have on stock market valuation of firms and therefore extends the existing related research which until now has focused on the impact on consumer purchasing intent and brand loyalty.

Does macroeconomic uncertainty really matter in predicting stock market behavior? A comparative study on China and USA

2020 ◽  
Vol 10 (4) ◽  
pp. 393-427 ◽  
Author(s):  
Ghulam Abbas ◽  
Shouyang Wang
Keyword(s):  
Risk Factors ◽  
Financial Crisis ◽  
Stock Market ◽  
Global Financial Crisis ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Macroeconomic Risk ◽  
Stock Market Return ◽  
Macroeconomic Uncertainty ◽  
The Impact

PurposeThe study aims to analyze the interaction between macroeconomic uncertainty and stock market return and volatility for China and USA and tries to draw some invaluable inferences for the investors, portfolio managers and policy analysts.Design/methodology/approachEmpirically the study uses GARCH family models to capture the time-varying volatility of stock market and macroeconomic risk factors by using monthly data ranging from 1995:M7 to 2018:M6. Then, these volatility series are further used in the multivariate VAR model to analyze the feedback interaction between stock market and macroeconomic risk factors for China and USA. The study also incorporates the impact of Asian financial crisis of 1997–1998 and the global financial crisis of 2007–2008 by using dummy variables in the GARCH model analysis.FindingsThe empirical results of GARCH models indicate volatility persistence in the stock markets and the macroeconomic variables of both countries. The study finds relatively weak and inconsistent unidirectional causality for China mainly running from the stock market to the macroeconomic variables; however, the volatility spillover transmission reciprocates when the impact of Asian financial crisis and Global financial crisis is incorporated. For USA, the contemporaneous relationship between stock market and macroeconomic risk factors is quite strong and bidirectional both at first and second moment level.Originality/valueThis study investigates the interaction between stock market and macroeconomic uncertainty for China and USA. The researchers believe that none of the prior studies has made such rigorous comparison of two of the big and diverse economies (China and USA) which are quite contrasting in terms of political, economic and social background. Therefore, this study also tries to test the presumed conception that macroeconomic uncertainty in China may have different impact on the stock market return and volatility than in USA.

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