Trend Factor in China: The Role of Large Individual Trading

89 Pages Posted: 13 Jun 2019 Last revised: 6 Feb 2024

See all articles by Yang Liu

Yang Liu

Hunan University - College of Finance and Statistics

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School

Yingzi Zhu

Tsinghua University - School of Economics & Management

Date Written: June 15, 2018

Abstract

We propose a novel trend factor for the Chinese stock market, which incorporates both price and volume information to capture dominant individual trading, momentum, and liquidity. We find that volume plays a more significant role in the trend factor for China than for the US, reflecting the greater retail participation in China. By incorporating this trend factor into the 3-factor model of Liu et al. (2019), we propose a 4-factor model that explains a wide range of stylized facts and 60 representative anomalies. Our study highlights the important role of individual trading in asset pricing, especially in China.

Keywords: Chinese Stock Market, Individual Trading, Factor Model, Anomalies, Mutual Funds

JEL Classification: G12, G14, G15

Suggested Citation

Liu, Yang and Zhou, Guofu and Zhu, Yingzi, Trend Factor in China: The Role of Large Individual Trading (June 15, 2018). Olin Business School Center for Finance & Accounting Research Paper No. Forthcoming, Available at SSRN: https://ssrn.com/abstract=3402038 or http://dx.doi.org/10.2139/ssrn.3402038

Yang Liu (Contact Author)

Hunan University - College of Finance and Statistics ( email )

Changsha
China

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School ( email )

Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)

HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/

Yingzi Zhu

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China
+86-10-62786041 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
2,025
Abstract Views
5,878
Rank
16,442
PlumX Metrics