The Asymmetric Positive Feedback Trading in Individual Stocks: China's Evidences

42 Pages Posted: 7 May 2015

See all articles by Die Wan

Die Wan

Zhejiang Gongshang University (ZJGSU)

Weiyi Liu

Capital University of Economics and Business

Xiaoguang Yang

Chinese Academy of Sciences (CAS)

Date Written: May 6, 2015

Abstract

Based on 4 years data of individual stocks in SZ300P index, the paper investigates the positive feedback trading behavior and its asymmetry. Regressions with heterogeneous belief terms show the presence of positive feedback trading in Chinese market. The traders who react to daily, weekly or monthly returns all exist in the market. The asymmetric pattern of positive feedback trading in individual stocks is quite different from that in developed markets and the findings in index data: The volume and order imbalance both rise more after price rises than those after price declines. An updated Sentana-Wadhwani model confirms the existence of this kind of asymmetric positive feedback trading. The asymmetric positive feedback trading tends to be more intensive in small-cap and high-liquid stocks, and this partially explains the contrast asymmetry between individual stocks and indexes.

Keywords: Positive feedback trading, Asymmetry, Individual stock data, Chinese market

JEL Classification: G10, G11, G15

Suggested Citation

Wan, Die and Liu, Weiyi and Yang, Xiaoguang, The Asymmetric Positive Feedback Trading in Individual Stocks: China's Evidences (May 6, 2015). Available at SSRN: https://ssrn.com/abstract=2603106 or http://dx.doi.org/10.2139/ssrn.2603106

Die Wan (Contact Author)

Zhejiang Gongshang University (ZJGSU) ( email )

Zhejiang
China

Weiyi Liu

Capital University of Economics and Business

Beijing
China

Xiaoguang Yang

Chinese Academy of Sciences (CAS) ( email )

52 Sanlihe Rd.
Datun Road, Anwai
Beijing, Xicheng District 100864
China

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