The Chinese Warrants Bubble: Evidence from Brokerage Account Records
Review of Financial Studies (Forthcoming)
68 Pages Posted: 23 Aug 2016 Last revised: 7 Jan 2020
Date Written: November 4, 2017
We use brokerage account records to study trading during the Chinese put warrants bubble and find evidence consistent with extrapolative theories of speculative asset price bubbles. We identify the event that started the bubble and show that investors engaged in a form of feedback trading based on their own past returns. The interaction of feedback trading with the precipitating event caused additional buying and price increases in a feedback loop, and estimates of the trading volume due to this mechanism explain prices and returns during the bubble.
Keywords: Speculative bubble, feedback loop, precipitating event, feedback trading, social contagion
JEL Classification: G12, G13, G14, O16, P34
Suggested Citation: Suggested Citation