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In search of concepts: The effects of speculative demand on returns and volume

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Author Info

  • ap Gwilym, Owain

    ()
    (Bangor Business School)

  • Wang, Qingwei

    ()
    (Bangor Business School)

  • Hasan, Iftekhar

    ()
    (Fordham University and Bank of Finland)

  • Xie, Ru

    ()
    (Bangor Business School)

Abstract

Using a novel proxy of investors’ speculative demand constructed from online search interest in “concept stocks”, we examine how speculative demand affects the returns and trading volume of Chinese stock indices. We find that returns and trading volume increase with the contemporaneous speculative demand. In addition, the high speculative demand causes lower near future returns, while recent high past returns cause the high speculative demand. Moreover, the speculative demand explains more variation in returns and trading volume of A shares (more populated by retail investors) than B shares (less populated by retail investors). Our findings support the attention theory of Barber and Odean (2008).

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/BoF_DP_1310.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 10/2013.

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Length: 35 pages
Date of creation: 28 May 2013
Date of revision:
Handle: RePEc:hhs:bofrdp:2013_010

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Related research

Keywords: investor attention; speculative demand; concept stock; market returns; trading volume;

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References

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  1. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  2. Michael S. Drake & Darren T. Roulstone & Jacob R. Thornock, 2012. "Investor Information Demand: Evidence from Google Searches Around Earnings Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 50(4), pages 1001-1040, 09.
  3. Denis Gromb & Dimitri Vayanos, 2010. "Limits of Arbitrage: The State of the Theory," NBER Working Papers 15821, National Bureau of Economic Research, Inc.
  4. Ron Kaniel & Gideon Saar & Sheridan Titman, 2008. "Individual Investor Trading and Stock Returns," Journal of Finance, American Finance Association, vol. 63(1), pages 273-310, 02.
  5. Jianping Mei & Jose Scheinkman & Wei Xiong, 2005. "Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia," NBER Working Papers 11362, National Bureau of Economic Research, Inc.
  6. Brad M. Barber & Terrance Odean & Ning Zhu, 2009. "Do Retail Trades Move Markets?," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 151-186, January.
  7. Thomas Wu & Jordi Mondria, 2011. "Asymmetric Attention and Stock Returns," 2011 Meeting Papers 134, Society for Economic Dynamics.
  8. Denis Gromb & Dimitri Vayanos, 2010. "Limits of Arbitrage," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 251-275, December.
  9. Hsieh, Jim & Walkling, Ralph A., 2006. "The history and performance of concept stocks," Journal of Banking & Finance, Elsevier, vol. 30(9), pages 2433-2469, September.
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