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What Explains Herd Behavior in the Chinese Stock Market?

Author

Listed:
  • Chong, Terence Tai-Leung
  • Liu, Xiaojin
  • Zhu, Chenqi

Abstract

This paper examines the causes of herd behavior in the Chinese stock market. Using the non-linear model of Chang, Cheng and Khorana (2000), we find robust evidence of herding in both the up and down markets. We contribute to the existing literature by exploring the underlying reasons for herding in China. It is shown that analyst recommendation, short-term investor horizon, and risk are the principal causes of herding. However, we cannot find evidence that relates herding to firm size, nor can we detect significant differences in herding between state-owned enterprises (SOE) and non-SOEs.

Suggested Citation

  • Chong, Terence Tai-Leung & Liu, Xiaojin & Zhu, Chenqi, 2016. "What Explains Herd Behavior in the Chinese Stock Market?," MPRA Paper 72100, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:72100
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    File URL: https://mpra.ub.uni-muenchen.de/72100/1/MPRA_paper_72100.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Indars, Edgars Rihards & Savin, Aliaksei & Lublóy, Ágnes, 2019. "Herding behaviour in an emerging market: Evidence from the Moscow Exchange," Corvinus Economics Working Papers (CEWP) 2019/01, Corvinus University of Budapest.
    2. repec:sgh:erfinj:v:3:y:2018:i:2:p:119-162 is not listed on IDEAS
    3. repec:wsi:afexxx:v:14:y:2019:i:01:n:s2010495219500040 is not listed on IDEAS

    More about this item

    Keywords

    A-share market; Herd behavior; Return dispersion; Systemic risk.;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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