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Rule improvements and irrational characteristics of herd behaviour–The effects of SMT policy

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  • Liu, Jia
  • Fu, Pengju
  • Lin, Chunyan

Abstract

As a large emerging capital market, China is gradually improving its trading systems. This study examines the causal effects of China's securities margin trading policy and finds that rule improvements significantly inhibit institutional buying and selling herding behaviour. This policy inhibits the behaviour of institutional herding that does not sufficiently assess fundamentals of listed companies or pay sufficient attention to market information. Influenced herd behaviour is not consistent the pursuit of value but are irrational characteristics. The policy effects are differentiated and effective. This study also provides a reference for other emerging capital markets to improve their systems.

Suggested Citation

  • Liu, Jia & Fu, Pengju & Lin, Chunyan, 2023. "Rule improvements and irrational characteristics of herd behaviour–The effects of SMT policy," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323005470
    DOI: 10.1016/j.frl.2023.104175
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    More about this item

    Keywords

    Herding behaviour; Rule improvements; Institutional investors; Shareholding motives; Information asymmetry;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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