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The Chinese Warrants Bubble: Evidence from Brokerage Account Records
[Bubbles and crises]

Author

Listed:
  • Neil D Pearson
  • Zhishu Yang
  • Qi Zhang

Abstract

We use brokerage account records to study trading during the Chinese put warrants bubble and find evidence consistent with extrapolative theories of speculative asset price bubbles. We identify the event that started the bubble and show that investors engaged in a form of feedback trading based on their own past returns. The interaction of feedback trading with the precipitating event caused additional buying and price increases in a feedback loop, and estimates of the trading volume due to this mechanism explain prices and returns during the bubble.

Suggested Citation

  • Neil D Pearson & Zhishu Yang & Qi Zhang, 2021. "The Chinese Warrants Bubble: Evidence from Brokerage Account Records [Bubbles and crises]," The Review of Financial Studies, Society for Financial Studies, vol. 34(1), pages 264-312.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:1:p:264-312.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaa037
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    Citations

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    Cited by:

    1. Sheridan Titman & Chishen Wei. Wei & Bin Zhao, 2021. "Corporate Actions and the Manipulation of Retail Investors in China: An Analysis of Stock Splits," NBER Working Papers 29212, National Bureau of Economic Research, Inc.
    2. Liao, Jingchi & Peng, Cameron & Zhu, Ning, 2022. "Extrapolative bubbles and trading volume," LSE Research Online Documents on Economics 110514, London School of Economics and Political Science, LSE Library.
    3. Cheema, Muhammad A. & Chiah, Mardy & Man, Yimei, 2022. "Overnight returns, daytime reversals, and future stock returns: Is China different?," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    4. Titman, Sheridan & Wei, Chishen & Zhao, Bin, 2022. "Corporate actions and the manipulation of retail investors in China: An analysis of stock splits," Journal of Financial Economics, Elsevier, vol. 145(3), pages 762-787.

    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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