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

  • ap Gwilym, Owain


    (Bangor Business School)

  • Wang, Qingwei


    (Bangor Business School)

  • Hasan, Iftekhar


    (Fordham University and Bank of Finland)

  • Xie, Ru


    (Bangor Business School)

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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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
Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
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  1. 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.
  2. 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.
  3. Jianping Mei & Jose A. Scheinkman & Wei Xiong, 2009. "Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia," CEMA Working Papers 504, China Economics and Management Academy, Central University of Finance and Economics.
  4. 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.
  5. Thomas Wu & Jordi Mondria, 2011. "Asymmetric Attention and Stock Returns," 2011 Meeting Papers 134, Society for Economic Dynamics.
  6. Dimitri Vayanos & Denis Gromb, 2010. "Limits of Arbitrage: The State of the Theory," FMG Discussion Papers dp650, Financial Markets Group.
  7. Denis Gromb & Dimitri Vayanos, 2010. "Limits of Arbitrage," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 251-275, December.
  8. Boulatov, Alex & Hatch, Brian C. & Johnson, Shane A. & Lei, Adam Y.C., 2009. "Dealer attention, the speed of quote adjustment to information, and net dealer revenue," Journal of Banking & Finance, Elsevier, vol. 33(8), pages 1531-1542, August.
  9. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  10. 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.
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