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Investor Herding in the China Stock Market: An Examination of ChiNext

Author

Listed:
  • Hui HONG

    (Research Center for Central China Economic and Social Development and School of Economics & Management, Nanchang University, Nanchang, Jiangxi, China)

  • Shulin XU

    (School of Economics, Jinan University, Guangzhou, Guangdong, China.)

  • Chien-Chiang LEE

    (Corresponding author. Research Center for Central China Economic and Social Development and School of Economics & Management, Nanchang University, Nanchang, Jiangxi, China.)

Abstract

This research investigates the presence and the asymmetric effects of investor herding in the ChiNext market over the period from October 30, 2009, to April 30, 2020, providing an interesting setting for herding analysis that has not yet been covered by the literature. We build our methodology based on Christie and Huang (1995) and Chang et al. (2000) and present empirical results showing that herding strongly exists in the market, even after controlling for the effect of COVID-19. The herding behavior also displays asymmetric effects associated with market conditions, industry, and firm size and is more pronounced in an up market and a bearish context, more prevalent in manufacturing and IT sectors, and stronger for large- and small-size portfolios. The results have investment implications for investors who seek out profitable trading opportunities in the China stock markets and policy implications for the China government that is endeavoring to better regulate its domestic financial markets.

Suggested Citation

  • Hui HONG & Shulin XU & Chien-Chiang LEE, 2020. "Investor Herding in the China Stock Market: An Examination of ChiNext," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 47-61, December.
    • Handle: RePEc:rjr:romjef:v::y:2020:i:4:p:47-61
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    References listed on IDEAS

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    Cited by:

    1. Wenmin Wu & Chien-Chiang Lee & Wenwu Xing & Shan-Ju Ho, 2021. "The impact of the COVID-19 outbreak on Chinese-listed tourism stocks," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-18, December.
    2. Peng, Kang-Lin & Wu, Chih-Hung & Lin, Pearl M.C. & Kou, IokTeng Esther, 2023. "Investor sentiment in the tourism stock market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).

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    More about this item

    Keywords

    herding; return dispersion; China stock market; asymmetric effect; ChiNext; A- and B-shares;
    All these keywords.

    JEL classification:

    • 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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