An Empirical Study of Investors’ Disposition Effect in China Based on Open Data from the Chinese Stock Markets

This paper focuses on investors’ different behavioral biases in China’s segmented stock markets and investigates the correlation between average holding periods, stock returns and investors’ disposition effect between 2010 and 2014. The results show that the disposition effect is prevalent in A-share market but is very weak in Growth Enterprise market and there is a lack of evidence to support the existence of disposition effect in B-share market. The study supports the view that investors’ experience and sophistication can partly help reduce investors’ behavioral biases in stock markets. It also indicates that investors in A-shares market prefer to hold stocks with larger market capitalization for longer periods, while investors of B-shares markets and Growth Enterprise market do not reveal a specific preference for market capitalization.

Download Full-text

Are Shocks Asymmetric to Volatility of Chinese Stock Markets?

Review of Pacific Basin Financial Markets and Policies ◽

10.1142/s0219091504000159 ◽

2004 ◽

Vol 07 (03) ◽

pp. 379-395 ◽

Cited By ~ 12

Author(s):

Wei-Chiao Huang ◽

Yuanlei Zhu

Keyword(s):

Stock Returns ◽

Stock Markets ◽

Garch Model ◽

Leverage Effect ◽

Arch Models ◽

Before And After ◽

Chinese Markets ◽

Chinese Stock Markets ◽

Better Than ◽

A Share

This paper uses ARCH models to examine if there is a leverage effect and also to test if A- and B-share holdings have different risks in Chinese stock markets before and after B-share markets open to domestic investors in February 2001. The empirical results suggest that leverage effect was not present and shocks have symmetric impact on the volatility of Chinese B-share stock returns in both periods and A-share returns in Period I. Thus GARCH model would be a better model to fit the Chinese B-share stock returns than EGARCH or GJR-GARCH model. But EGARCH or GJR-GARCH model fits recent (Period II) A-share markets data better than GARCH model. Another finding of this paper is that holding A- or B-share bears different risk in returns in the two Chinese markets. Furthermore, news or shocks have a larger impact on volatility of B-share returns in Period I than in Period II.

Download Full-text

Examining investors' sentiments, behavioral biases and investment decisions during COVID-19 in the emerging stock market: a case of Pakistan stock market

Journal of Economic and Administrative Sciences ◽

10.1108/jeas-08-2020-0153 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Shagufta Parveen ◽

Zoya Wajid Satti ◽

Qazi Abdul Subhan ◽

Nishat Riaz ◽

Samreen Fahim Baber ◽

...

Keyword(s):

Developing Countries ◽

Stock Market ◽

Behavioral Finance ◽

Stock Markets ◽

Investment Decisions ◽

Equation Modeling ◽

Disposition Effect ◽

Content Type ◽

Behavioral Biases ◽

The Impact

PurposeThis study investigates the impact of the COVID-19 pandemic on investors' sentiments, behavioral biases and investment decisions in the Pakistan Stock Exchange (PSX).Design/methodology/approachThe authors have assessed investors' behaviors and sentiments and the stock market overreaction during COVID-19 using a questionnaire and collected data from 401 investors trading in the PSX.FindingsResults of structural equation modeling revealed that the COVID-19 pandemic affected investors' behaviors, investment decisions and trade volume. It created feelings of fear and uncertainty among market participants. Evidence suggests that behavioral heuristics and biases, including representative heuristic, anchoring heuristic, overconfidence bias and disposition effect, negatively influenced investors' decisions at the PSX.Research limitations/implicationsThis study will contribute to behavioral finance literature in the context of developing countries as it has revealed the impact of COVID-19 on the emerging stock market, and its results are generalizable to other emerging stock markets.Practical implicationsThe findings of this study will help academicians, researchers and policymakers of developing countries. Academicians can formulate new behavioral models that can depict the solutions of dealing with an uncertain situation like COVID-19. Policymakers like the Securities Exchange Commission and the PSX can formulate crisis management strategies based on behavioral finance concepts to cope with situations like COVID-19 in the future and help lessen investors' losses in the stock markets. The role of the Securities Exchange Commission is crucial as it regulates the financial markets. It can arrange workshops to educate investors to manage their decisions during crisis time and focus on the best use of irrational and rational decision-making at the same time using Lo (2004) adaptive market hypothesis.Originality/valueThe novelty of the paper is that the authors have introduced overconfidence and disposition effect as mediators that create a connection between representative and anchoring heuristics and investment decisions using primary data collected from investors (institutional and retail) to demonstrate the presence of psychological biases during COVID-19, and it has been done for the first time according to authors' knowledge. It is a contribution and addition to the behavioral finance literature in the context of developing countries' stock markets and their efficiency.

Download Full-text