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Internet sentiment exacerbates intraday overtrading, evidence from A-Share market

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  • Peng Yifeng

Abstract

Market fluctuations caused by overtrading are important components of systemic market risk. This study examines the effect of investor sentiment on intraday overtrading activities in the Chinese A-share market. Employing high-frequency sentiment indices inferred from social media posts on the Eastmoney forum Guba, the research focuses on constituents of the CSI 300 and CSI 500 indices over a period from 01/01/2018, to 12/30/2022. The empirical analysis indicates that investor sentiment exerts a significantly positive impact on intraday overtrading, with the influence being more pronounced among institutional investors relative to individual traders. Moreover, sentiment-driven overtrading is found to be more prevalent during bull markets as opposed to bear markets. Additionally, the effect of sentiment on overtrading is observed to be more pronounced among individual investors in large-cap stocks compared to small- and mid-cap stocks.

Suggested Citation

  • Peng Yifeng, 2024. "Internet sentiment exacerbates intraday overtrading, evidence from A-Share market," Papers 2404.12001, arXiv.org, revised Apr 2024.
    • Handle: RePEc:arx:papers:2404.12001
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    References listed on IDEAS

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    1. Zhang, Xiaotao & Liang, Junpeng & He, Feng, 2019. "Private information advantage or overconfidence? Performance of intraday arbitrage speculators in the Chinese stock market," Pacific-Basin Finance Journal, Elsevier, vol. 58(C).
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    3. Ke, Yun & Zhang, Yanan, 2020. "Does high-frequency trading reduce market underreaction to earnings news?," Finance Research Letters, Elsevier, vol. 34(C).
    4. Robert Bricker & Garen Markarian, 2015. "Institutional Investors and Insider Trading Profitability," European Accounting Review, Taylor & Francis Journals, vol. 24(3), pages 495-518, September.
    5. Paul Willman & Mark Fenton‐O'Creevy & Nigel Nicholson & Emma Soane, 2006. "Noise Trading and the Management of Operational Risk; Firms, Traders and Irrationality in Financial Markets," Journal of Management Studies, Wiley Blackwell, vol. 43(6), pages 1357-1374, September.
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