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Transitory Price Changes in the Chinese Stock Markets

Author

Listed:
  • Zhaohui Zhang

    (College of Management, Long Island University, C.W. Post Campus, Brookville, NY 11548, USA)

  • Howard Nemiroff

    (Sprott School of Business, Carleton University, Ottawa, ON K1S 5B6, Canada)

  • Jiamin Wang

    (College of Management, Long Island University, C.W. Post Campus, Brookville, NY 11548, USA)

  • Khondkar Karim

    (Saunders College of Business, Rochester Institute of Technology, Rochester, NY 14623, USA)

Abstract

This paper examines opening and closing return patterns on the Chinese stock markets. We find that open-to-open returns are significantly more volatile than close-to-close returns. In addition, the correlation of the overnight return with the following daytime return is significantly negative, while the correlation of the daytime return with the following overnight return is strongly positive. The results show strong price continuation around the close and strong price reversal at the open, and the findings are not sensitive to trading volume. The findings are less likely to be caused by price limits. Our results are inconsistent with previous findings from the Tokyo Stock Exchange, yet similar to those from the New York Stock Exchange, albeit under a different market structure.

Suggested Citation

  • Zhaohui Zhang & Howard Nemiroff & Jiamin Wang & Khondkar Karim, 2007. "Transitory Price Changes in the Chinese Stock Markets," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 10(04), pages 519-540.
    • Handle: RePEc:wsi:rpbfmp:v:10:y:2007:i:04:n:s0219091507001185
    DOI: 10.1142/S0219091507001185
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    More about this item

    Keywords

    Chinese stock markets; microstructure; trading mechanisms; transitory volatility; price limits;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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