Government Intervention and Institutional Trading Strategy: Evidence from a Transition Country

50 Pages Posted: 2 May 2012 Last revised: 13 May 2015

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Zhiyuan Liu

Nankai University - Department of Accounting

Yang Rong

affiliation not provided to SSRN

Yi Yao

Nankai University - Department of Accounting

Date Written: April 20, 2012

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 government intervention in markets in other transitional economies, as well as in developed countries.

Keywords: government intervention, institutional trading strategy

JEL Classification: G15, G18, G32

Suggested Citation

Hasan, Iftekhar and Liu, Zhiyuan and Rong, Yang and Yao, Yi, Government Intervention and Institutional Trading Strategy: Evidence from a Transition Country (April 20, 2012). Global Finance Journal, Vol. 24, No. 1, 2013, BOFIT Discussion Paper No. 9/2012, Available at SSRN: https://ssrn.com/abstract=2049763 or http://dx.doi.org/10.2139/ssrn.2049763

Iftekhar Hasan (Contact Author)

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Zhiyuan Liu

Nankai University - Department of Accounting ( email )

94 Weijin Road, Nankai District
Tianjin, Tianjin 300071
China

Yang Rong

affiliation not provided to SSRN ( email )

Yi Yao

Nankai University - Department of Accounting ( email )

94 Weijin Road, Nankai District
Tianjin, Tianjin 300071
China

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