Stock Return Seasonalities and Investor Structure: Evidence from China's B-Share Markets

Abstract

This paper investigates whether seasonalities in daily stock returns are related to the trading behavior of individual and institutional investors. The change in the investor structure of B-share markets in Shanghai and Shenzhen after the abolition of ownership restrictions in 2001 provides a unique testing environment. We show that day-of-the-week effects are attenuated after the market entrance of Chinese individual investors, who had previously not been allowed to trade in B-shares. Our empirical results suggest that institutional rather than individual investors are a main driving force behind such anomalies. In addition, we find evidence of reduced index return autocorrelation and US spillover effects in the post-liberalization period.

Efeito Calendário e Finanças Comportamentais no Segmento de Fundos Multimercados

“…Uma das anomalias mais importantes e que desafia a hipótese de eficiência de mercado (Fama, 1970(Fama, , 1991 é o efeito dia da semana ou segunda-feira (Bohl, Schuppli, & Siklos, 2010). Após as pesquisas de Cross (1973) e French (1980, foram documentados retornos significativamente negativos na segunda-feira, sendo também que um grande corpo da literatura tem evoluído para documentar retornos diários anormais para muitos mercados de ações no mercado financeiro mundial (Agrawal & Tandon, 1994;Barone, 1990).…”

Is There A Difference Between Domestic And Foreign Risk Premium? The Case Of China Stock Market

“…One reason for this is that may be the ratio of institutional investors in B shares is higher than in A shares, so it is easier for them to manipulate the B shares price and thus makes the price more volatile. Another reason which can also contribute to this issue is that in 2001 the policy for the B share investment restriction has been released and B share price fluctuates more frequently than A share around that time, this also increases the volatility (Bohl et al, 2009). We agree with Stulz and Wasserfallen (1995) and Domowitz et al (1997) to say that there is a bias: The fact that investors prefer local stocks to foreign equities led to an imbalance in the demand and prices between different classes of shares.…”

Moon Phases, Mood and Stock Market Returns

“…We re-examine the empirical linkages between moon phases and stock market returns using a TGARCH model which captures an effect where negative shocks have a greater volatility impact than positive shocks (this study is the first investigation of the possibility of moon-calendar anomalies using a TGARCH time series approach which is able to capture the seasonal dependency, or the annual cycle of moon, as well as the fluctuation of returns or volatility response from market shocks). 9 We not only test whether the phases of moon affect stock returns but also we investigate whether the returns are higher in winter (January effect-see Ciccone 2011; 10 Floros 2008a10 Floros , 2011Yuan et al 2006) and lower during the first day of the week (Monday effect-see Alt et al 2011;Bohl et al 2010;Levy and Yagil 2011). These calendar effects are heavily related with the behavioural finance theories (that is, investors' mood) in the way that (a) the January effect assumes that financial returns in January are large compared to the returns of the other months (Floros 2011), and (b) the Monday effect 11 is where the returns are significantly lower over the first trading day of the week (see Levy and Yagil 2011;Yuan et al 2006); explanations include the settlement procedure hypothesis, measurement errors, the timing of earnings announcements and the influence of institutional versus individual investor trading (Bohl et al 2010), spillover effect from other Journal of Emerging Market Finance, 12, 1 (2013): 107-127 large markets, risk-return trade-off and speculative short sales (Charles 2010).…”

“…We not only test whether the phases of moon affect stock returns but also we investigate whether the returns are higher in winter (January effect—see Ciccone 2011; 10 Floros 2008a, 2011; Keef and Khaled 2011; Yuan et al 2006) and lower during the first day of the week (Monday effect—see Alt et al 2011; Bohl et al 2010; Levy and Yagil 2011). These calendar effects are heavily related with the behavioural finance theories (that is, investors’ mood) in the way that (a) the January effect assumes that financial returns in January are large compared to the returns of the other months (Floros 2011), and (b) the Monday effect 11 is where the returns are significantly lower over the first trading day of the week (see Levy and Yagil 2011; Yuan et al 2006); explanations include the settlement procedure hypothesis, measurement errors, the timing of earnings announcements and the influence of institutional versus individual investor trading (Bohl et al 2010), spillover effect from other large markets, risk–return trade-off and speculative short sales (Charles 2010).…”