Market Crowd Trading Conditioning and Its Measurement

38 Pages Posted: 20 Aug 2010 Last revised: 28 Nov 2011

See all articles by Leilei Shi

Leilei Shi

Haitong Securities Co. Ltd.----Beijing Fuwaidajie; International Institute of Finance, School of Management, University of Science and Technology of China (USTC)

Liyan Han

Beihang University (BUAA) - School of Economic and Management Science

Yiwen Wang

Beihang University (BUAA)

Ding Chen

Van Gold Asset Management

Yan Piao

Complex System Research Group

Chengling Gou

Beihang University (BUAA)

Date Written: November 5, 2011

Abstract

In this paper, we study market crowd psychological behaviors in learning by correlation analysis, using every trading high frequency data in China stock market. We introduce a notion of trading conditioning in terms of operant conditioning in psychology and measure its intensity by accumulative trading volume probability in a time interval in the transaction price-volume probability wave equation that can describe market crowd coherence in their interacted trading behavior. We find that there is, in general, significant positive correlation between the rate of price volatility mean return and the change in the intensity of market crowd trading conditioning. They behave significantly disposition effect in stock selling and herd behavior in stock buying with expectation on return simultaneously. Specifically, “the herd” have significant stronger expectation on price momentum than its reversal. Second, there is also a significant negative correlation between them in a subdivided term; market crowd show buy-and-hold behavior when price rises steadily, and panic selling when it drops abruptly in depth. We explain both the puzzle of more peaked, heavily tailed, and clustered characteristics in return distribution by coherence and that of market crowd behavioral “anomalies” by trading conditioning in a unified transaction price-volume probability wave framework.

Keywords: behavioral finance, econophysics, crowd behavior, trading conditioning, probability wave, and interaction and coherence

JEL Classification: G12, D03, D83

Suggested Citation

Shi, Leilei and Han, Liyan and Wang, Yiwen and Chen, Ding and Piao, Yan and Gou, Chengling, Market Crowd Trading Conditioning and Its Measurement (November 5, 2011). Available at SSRN: https://ssrn.com/abstract=1661515 or http://dx.doi.org/10.2139/ssrn.1661515

Leilei Shi (Contact Author)

Haitong Securities Co. Ltd.----Beijing Fuwaidajie ( email )

#2010, Tower A
#2 Fuwaidajie, Xicheng District
Beijing, 100037
China
0086+18611270598 (Phone)

HOME PAGE: http://https://www.htsec.com/ChannelHome/4793976/index.shtml

International Institute of Finance, School of Management, University of Science and Technology of China (USTC) ( email )

96, Jinzhai Road
Hefei, Anhui 230026
China
(0086)18611270598,13671328061 (Phone)

Liyan Han

Beihang University (BUAA) - School of Economic and Management Science ( email )

37 Xue Yuan Road
Beijing 100083
China

Yiwen Wang

Beihang University (BUAA)

37 Xue Yuan Road
Beijing 100083
China

Ding Chen

Van Gold Asset Management ( email )

United States

Yan Piao

Complex System Research Group

Austria

Chengling Gou

Beihang University (BUAA) ( email )

37 Xue Yuan Road
Beijing 100083
China

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