Work

Foreign Capital in the Chinese Stock Market: A Firm-Level Study

Year: 2025

Type: article

Abstract: Using a proprietary data set covering all foreign investors’ daily trades in the Chinese stock market from 2016 to 2019, we find that foreign order flows, facilitated by regulatory liberalization through several channels, present strong predictive power for future stock returns, implying that these order flows are likely informed. We track the source of this informativeness and find that foreign order flows significantly predict firm-level news and news-day returns, suggesting that foreign investors can effectively process local firm information. Finally, we find that regulatory reforms that generally relax investment access requirements further improve foreign investors’ predictive power.

Source: Journal of Financial and Quantitative Analysis

DOI: 10.1017/s0022109025102081

Authors: Christian T. Lundblad, Donghui Shi, Xiaoyan Zhang, Zijian Zhang

Institutions: University of North Carolina at Chapel Hill, Fudan University, Tsinghua University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W4413901567

FWCI: 6.573

Cites: 62

Cited by: 7

Related to: 10