The Trading Behavior of Institutions and Individuals in Chinese Equity Markets

26 Pages Posted: 3 Nov 2006

See all articles by Lilian Ng

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Fei Wu

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2006

Abstract

This paper employs a unique data set to analyze the trading behavior of 4.74 million individual and institutional investors across Mainland China. Results show that groups of individual investors with varying trade values (as proxies for wealth levels) engage in different trading strategies. Chinese institutions are momentum investors, while less wealthy Chinese individual investors at large are contrarian investors. The results also indicate that a small group of wealthiest Chinese individuals tend to behave like institutions when they buy stocks, and behave like less wealthy individuals when they sell. Furthermore, only the trading activities of institutions and of wealthiest individuals can affect future stock volatility, but those of Chinese individual investors at large have no predictive power for future stock returns.

Keywords: Trading behavior, momentum and contrarian strategies, stock volatility

JEL Classification: G11, G15

Suggested Citation

Ng, Lilian and Wu, Fei, The Trading Behavior of Institutions and Individuals in Chinese Equity Markets (July 2006). Available at SSRN: https://ssrn.com/abstract=941894 or http://dx.doi.org/10.2139/ssrn.941894

Lilian Ng (Contact Author)

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
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Toronto, Ontario ON M3J 1P3
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+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

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Belgium

Fei Wu

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

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