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Herding tendency among investors with heterogeneous information: Evidence from China’s equity markets

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  • Alhaj-Yaseen, Yaseen S.
  • Yau, Siu-Kong

Abstract

We investigate herding behavior using daily data of 87 Chinese stocks cross-listed on the A- and B-markets between 1996–2012, and shed light on herding within and between groups of investors with heterogeneous information. In addition to examining unconditional herding before and after the 2001-02 Chinese market liberalization, we explore different patterns of herd formation under different information environments. The results show that herding is present in both markets; however, while its intensity dropped significantly in the B-market after liberalization, it remains relatively unchanged in the A-market. Investors in the A-market exhibit intentional (non-fundamental) and unintentional (fundamental) herding over the entire period, while investors in the B-market exhibit intentional herding prior to market liberalization as well as both intentional and unintentional herding thereafter. Additionally, the results reveal possible interactions among and between arbitrageurs and noise traders in both markets.

Suggested Citation

  • Alhaj-Yaseen, Yaseen S. & Yau, Siu-Kong, 2018. "Herding tendency among investors with heterogeneous information: Evidence from China’s equity markets," Journal of Multinational Financial Management, Elsevier, vol. 47, pages 60-75.
    • Handle: RePEc:eee:mulfin:v:47-48:y:2018:i::p:60-75
    DOI: 10.1016/j.mulfin.2018.11.001
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    Cited by:

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    6. Oi-Ping Chong & A.N. Bany-Ariffin & Annuar Md Nassir & Junaina Muhammad, 2019. "An Empirical Study of Herding Behaviour in China’s A-Share and B-Share Markets: Evidence of Bidirectional Herding Activities," Capital Markets Review, Malaysian Finance Association, vol. 27(2), pages 37-57.
    7. Arjoon, Vaalmikki & Bhatnagar, Chandra Shekhar & Ramlakhan, Prakash, 2020. "Herding in the Singapore stock Exchange," Journal of Economics and Business, Elsevier, vol. 109(C).

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    More about this item

    Keywords

    Chinese equity market; Herding behavior; Heterogeneous information; Market liberalization;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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