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A unique “T+1 trading rule” in China: Theory and evidence


  • Guo, Ming
  • Li, Zhan
  • Tu, Zhiyong


Unique to the world, China adopts a “T+1 trading rule”, which prevents investors from selling stocks bought on the same day. We develop a dynamic price manipulation model to study the effects of the “T+1 trading rule”. Compared to the “T+0 trading rule”, which allows investors to buy and sell the same stocks during the same day, we show that the “T+1 trading rule” reduces the total trading volume and price volatility, and improves the trend chasers’ welfare when trend-chasing is strong. An empirical test using data on China’s B-share stock market supports the model’s theoretical predictions.

Suggested Citation

  • Guo, Ming & Li, Zhan & Tu, Zhiyong, 2012. "A unique “T+1 trading rule” in China: Theory and evidence," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 575-583.
  • Handle: RePEc:eee:jbfina:v:36:y:2012:i:2:p:575-583 DOI: 10.1016/j.jbankfin.2011.09.002

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    References listed on IDEAS

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    Cited by:

    1. Feng, Xunan & Johansson, Anders C., 2016. "Judging a Book by Its Cover: Analysts and Attention-Driven Price Patterns in China’s IPO Market," Stockholm School of Economics Asia Working Paper Series 2016-39, Stockholm School of Economics, Stockholm China Economic Research Institute.

    More about this item


    T+1 trading rule; Trading volume; Volatility; Trend-chasing;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates


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