Institutional Trading in Volatile Markets: Evidence from Chinese Stock Markets

39 Pages Posted: 24 May 2019 Last revised: 1 Sep 2019

See all articles by Julia Darby

Julia Darby

University of Strathclyde, Glasgow - Strathclyde Business School - Department of Economics

Hai Zhang

Strathclyde Business School

Jinkai Zhang

University of Strathclyde

Date Written: April 26, 2019

Abstract

We investigate all listed firms in Shanghai and Shenzhen stock Exchanges on extreme market movement days over 2010 to 2017, and highlight the important role of price limit on post extreme day stock returns. Utilising daily cash flow data of the largest trading group as a proxy of institutional investors trading behaviour, we identify institutional investors’ consistently destabilizing effects on extreme days across two markets. We further show the upper (lower) price limit hitting stocks continue to increase (decrease) for at least two subsequent days, and find evidence of long run price reversal for lower hitting stocks. Finally we find the greater net buy by large traders the higher abnormal return in three subsequent days of the upper price limit hitting regular stocks, while the net sell on extreme days tend to predict the positive subsequent abnormal returns.

Keywords: Extreme market swings, Price limit, Cash flow, Institutional trading behavior

JEL Classification: G11, G12, G14, G28

Suggested Citation

Darby, Julia and Zhang, Hai and ZHANG, JINKAI, Institutional Trading in Volatile Markets: Evidence from Chinese Stock Markets (April 26, 2019). Available at SSRN: https://ssrn.com/abstract=3378571 or http://dx.doi.org/10.2139/ssrn.3378571

Julia Darby

University of Strathclyde, Glasgow - Strathclyde Business School - Department of Economics ( email )

Sir William Duncan Building
130 Rottenrow
Glasgow, G4 0GE
United Kingdom

HOME PAGE: http://www.economics.strath.ac.uk/julia/

Hai Zhang (Contact Author)

Strathclyde Business School ( email )

199 Cathedral Street
Glasgow G4 0QU
United Kingdom

JINKAI ZHANG

University of Strathclyde ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom

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