IDEAS home Printed from https://ideas.repec.org/a/spr/fininn/v11y2025i1d10.1186_s40854-024-00711-6.html
   My bibliography  Save this article

The “two sessions”: institutional investors selloff to avoid ambiguity

Author

Listed:
  • Jiarui Wang

    (Beihang University)

  • Haijun Yang

    (Beihang University
    Key Laboratory of Complex System Analysis, Management and Decision (Beihang University), Ministry of Education)

  • Shancun Liu

    (Beihang University)

Abstract

We construct a model to examine the time-varying ambiguity of investors. When ambiguity occurs concerning recent news, long (short) position investors who are averse to ambiguity reduce (increase) their holdings, resulting in price drops (rises). We empirically analyze how the “two sessions,” a significant event with high policy ambiguity in China, affect the financial market. Our findings suggest that institutional investors mainly sell their holdings between 15 and 5 days before the meetings. Furthermore, the delay in the “two sessions” in 2020 suggests that these selloffs are driven by ambiguity aversion rather than new information.

Suggested Citation

  • Jiarui Wang & Haijun Yang & Shancun Liu, 2025. "The “two sessions”: institutional investors selloff to avoid ambiguity," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 11(1), pages 1-25, December.
    • Handle: RePEc:spr:fininn:v:11:y:2025:i:1:d:10.1186_s40854-024-00711-6
    DOI: 10.1186/s40854-024-00711-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s40854-024-00711-6
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1186/s40854-024-00711-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Spyros Galanis & Christos A Ioannou & Stelios Kotronis, 2024. "Information Aggregation Under Ambiguity: Theory and Experimental Evidence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(6), pages 3423-3467.
    2. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    3. 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, February.
    4. Wujun Lv & Tao Pang & Xiaobao Xia & Jingzhou Yan, 2023. "Dynamic portfolio choice with uncertain rare-events risk in stock and cryptocurrency markets," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-28, December.
    5. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    6. Dlugosch, Dennis & Horn, Kristian & Wang, Mei, 2023. "New experimental evidence on the relationship between home bias, ambiguity aversion and familiarity heuristics," Journal of Economics and Business, Elsevier, vol. 125.
    7. Andy Puckett & Xuemin (Sterling) Yan, 2011. "The Interim Trading Skills of Institutional Investors," Journal of Finance, American Finance Association, vol. 66(2), pages 601-633, April.
    8. Goodell, John W. & Vähämaa, Sami, 2013. "US presidential elections and implied volatility: The role of political uncertainty," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 1108-1117.
    9. Hwa-Sung Kim, 2023. "Effects of ambiguity on innovation strategies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-27, December.
    10. Qiu, Jiayan & Huang, Wei & Jiang, Ying, 2023. "When do they trade? Heterogeneous investors in China," Finance Research Letters, Elsevier, vol. 54(C).
    11. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    12. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
    13. Rossella Agliardi, 2018. "Value-at-risk under ambiguity aversion," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 4(1), pages 1-13, December.
    14. Benkraiem, Ramzi & Goutte, Stéphane & Saadi, Samir & Zhu, Hui & Zhu, Steven, 2022. "Investor heterogeneity and negative skewness in stock returns: Evidence from institutional investors," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    15. Barrot, Jean-Noel & Kaniel, Ron & Sraer, David, 2016. "Are retail traders compensated for providing liquidity?," Journal of Financial Economics, Elsevier, vol. 120(1), pages 146-168.
    16. Shi, Zhan, 2019. "Time-varying ambiguity, credit spreads, and the levered equity premium," Journal of Financial Economics, Elsevier, vol. 134(3), pages 617-646.
    17. Lee, Kiryoung & Choi, Eunseon & Kim, Minki, 2023. "Twitter-based Chinese economic policy uncertainty," Finance Research Letters, Elsevier, vol. 53(C).
    18. Jiang, Julia & Liu, Jun & Tian, Weidong & Zeng, Xudong, 2022. "Portfolio concentration, portfolio inertia, and ambiguous correlation," Journal of Economic Theory, Elsevier, vol. 203(C).
    19. David Easley & Maureen O'Hara, 2009. "Ambiguity and Nonparticipation: The Role of Regulation," The Review of Financial Studies, Society for Financial Studies, vol. 22(5), pages 1817-1843, May.
    20. Ozdamar, Melisa & Sensoy, Ahmet & Akdeniz, Levent, 2022. "Retail vs institutional investor attention in the cryptocurrency market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    21. Boatright, John R., 2007. "Reluctant Guardians: The Moral Responsibility of Gatekeepers," Business Ethics Quarterly, Cambridge University Press, vol. 17(4), pages 613-632, October.
    22. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    23. Kostopoulos, Dimitrios & Meyer, Steffen & Uhr, Charline, 2022. "Ambiguity about volatility and investor behavior," Journal of Financial Economics, Elsevier, vol. 145(1), pages 277-296.
    24. Apostolakis, George N. & Floros, Christos & Gkillas, Konstantinos & Wohar, Mark, 2021. "Political uncertainty, COVID-19 pandemic and stock market volatility transmission," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    25. Goodell, John W. & Kumar, Satish & Rao, Purnima & Verma, Shubhangi, 2023. "Emotions and stock market anomalies: A systematic review," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    26. Dyckman, T & Philbrick, D & Stephan, J, 1984. "A Comparison Of Event Study Methodologies Using Daily Stock Returns - A Simulation Approach," Journal of Accounting Research, Wiley Blackwell, vol. 22, pages 1-30.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Josef Falkinger, 2014. "In search of economic reality under the veil of financial markets," ECON - Working Papers 154, Department of Economics - University of Zurich.
    2. Gong, Aibo & Ke, Shaowei & Qiu, Yawen & Shen, Rui, 2022. "Robust pricing under strategic trading," Journal of Economic Theory, Elsevier, vol. 199(C).
    3. Philipp K. Illeditsch & Jayant V. Ganguli & Scott Condie, 2021. "Information Inertia," Journal of Finance, American Finance Association, vol. 76(1), pages 443-479, February.
    4. Zhou, Tong, 2021. "Ambiguity, asset illiquidity, and price variability," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 280-292.
    5. Condie, Scott & Ganguli, Jayant, 2017. "The pricing effects of ambiguous private information," Journal of Economic Theory, Elsevier, vol. 172(C), pages 512-557.
    6. Ayoub, Mahmoud & Qadan, Mahmoud, 2024. "Ambiguity and risk in the oil market," Economic Modelling, Elsevier, vol. 132(C).
    7. Hsieh, Chia-Chun & Ma, Zhiming & Novoselov, Kirill E., 2019. "Accounting conservatism, business strategy, and ambiguity," Accounting, Organizations and Society, Elsevier, vol. 74(C), pages 41-55.
    8. Füllbrunn, Sascha & Rau, Holger A. & Weitzel, Utz, 2014. "Does ambiguity aversion survive in experimental asset markets?," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 810-826.
    9. Panagiotidis, Theodore & Printzis, Panagiotis, 2020. "What is the investment loss due to uncertainty?," Global Finance Journal, Elsevier, vol. 45(C).
    10. Sujoy Mukerji & Han N. Ozsoylev & Jean‐Marc Tallon, 2023. "Trading Ambiguity: A Tale Of Two Heterogeneities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 1127-1164, August.
    11. Junyong He & Helen Hui Huang & Shunming Zhang, 2020. "Ambiguity Aversion, Information Acquisition, and Market Opacity," Annals of Economics and Finance, Society for AEF, vol. 21(2), pages 263-329, November.
    12. Claudio Michelacci & Luigi Paciello, 2020. "Aggregate Risk or Aggregate Uncertainty? Evidence from UK Households," EIEF Working Papers Series 2006, Einaudi Institute for Economics and Finance (EIEF), revised Apr 2020.
    13. Ilut, Cosmin & Saijo, Hikaru, 2021. "Learning, confidence, and business cycles," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 354-376.
    14. Jiang, Julia & Liu, Jun & Tian, Weidong & Zeng, Xudong, 2022. "Portfolio concentration, portfolio inertia, and ambiguous correlation," Journal of Economic Theory, Elsevier, vol. 203(C).
    15. Meyer, Steffen & Uhr, Charline, 2024. "Ambiguity and private investors’ behavior after forced fund liquidations," Journal of Financial Economics, Elsevier, vol. 156(C).
    16. Krahnen, Jan Pieter & Ockenfels, Peter & Wilde, Christian, 2014. "Measuring ambiguity aversion: A systematic experimental approach," SAFE Working Paper Series 55, Leibniz Institute for Financial Research SAFE.
    17. Chen, Qiang & Han, Yu, 2023. "Options market ambiguity and its information content," Journal of Financial Markets, Elsevier, vol. 64(C).
    18. Wu, Chen-Hui, 2022. "The informativeness of brokerage reports: Privately-circulated versus publicly-disseminated news," International Review of Financial Analysis, Elsevier, vol. 83(C).
    19. Alyssa G. Anderson, 2015. "Ambiguity in Securitization Markets," Finance and Economics Discussion Series 2015-33, Board of Governors of the Federal Reserve System (U.S.).
    20. Li, Wenhui & Wilde, Christian, 2021. "Separating the effects of beliefs and attitudes on pricing under ambiguity," SAFE Working Paper Series 311, Leibniz Institute for Financial Research SAFE.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:fininn:v:11:y:2025:i:1:d:10.1186_s40854-024-00711-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.