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Herding in Chinese stock markets: Evidence from the dual-investor-group

Author

Listed:
  • Liu, Tengdong
  • Zheng, Dazhi
  • Zheng, Suyan
  • Lu, Yang
Abstract
Employing the group-specific herding measure, we explore the herding behavior in Chinese stock markets where a dual-group investor structure exists. Using high-frequency trading data, we find that the in-group herding tendency for most-informed investors and least-informed investors exhibits different patterns and has distinct effects on the market level herding as well as on subsequent market performances. Those effects are different in the “pre-peak” period and “post-peak” period from 7/2014 to 6/2016. Specifically, the evidence suggests that most-informed investors generally herd less than least-informed investors in the Chinese stock markets, but the gap narrows down when the market collapses and uncertainty increases. In addition, informed investors herd on fundamental factors and uninformed investors herd on non-fundamental factors only in the “post-peak” period.

Suggested Citation

  • Liu, Tengdong & Zheng, Dazhi & Zheng, Suyan & Lu, Yang, 2023. "Herding in Chinese stock markets: Evidence from the dual-investor-group," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:pacfin:v:79:y:2023:i:c:s0927538x23000586
    DOI: 10.1016/j.pacfin.2023.101992
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    References listed on IDEAS

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    Cited by:

    1. Liu, Jia & Fu, Pengju & Lin, Chunyan, 2023. "Rule improvements and irrational characteristics of herd behaviour–The effects of SMT policy," Finance Research Letters, Elsevier, vol. 56(C).
    2. Xing, Shuo & Cheng, Tingting & Sun, Shuanglin, 2024. "Do investors herd under global crises? A comparative study between Chinese and the United States stock markets," Finance Research Letters, Elsevier, vol. 62(PA).

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    More about this item

    Keywords

    Herding behavior; Herding tendency; Institutional investors; Chinese stock markets;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G40 - Financial Economics - - Behavioral Finance - - - General

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