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Ease-of-processing heuristics and asset prices: Evidence from the exchange-traded repo market in China

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Listed:
  • Fang, Xuyun
  • Jiang, Zhiqian
  • Liu, Baixiao
  • McConnell, John J.
  • Zhou, Mingshan

Abstract

Prior to May 22, 2017, price information displayed on stock exchanges on certain days and on days prior to market-closed holidays required investors in exchange-traded repos to infer repos' actual maturities to place orders at appropriate rates. Repo rates on these days exhibited remarkable seasonalities. On May 22, 2017, the displayed information was modified so investors no longer had to infer actual maturities. Thereafter, the seasonalities disappeared. We ascribe the seasonalities to investors employing an ease-of-processing heuristic that failed to decipher repos’ actual maturities. Disappearance of the mispricing gives greater assurance to investors of securing competitive repo rates.

Suggested Citation

  • Fang, Xuyun & Jiang, Zhiqian & Liu, Baixiao & McConnell, John J. & Zhou, Mingshan, 2022. "Ease-of-processing heuristics and asset prices: Evidence from the exchange-traded repo market in China," Journal of Financial Markets, Elsevier, vol. 59(PB).
    • Handle: RePEc:eee:finmar:v:59:y:2022:i:pb:s1386418121000380
    DOI: 10.1016/j.finmar.2021.100656
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    More about this item

    Keywords

    Cognitive biases; Ease-of-processing heuristic; Seasonalities; Exchange-traded repo;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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