Work

Is daily Chinese institutional trading and stock price volatility positively correlated?

Year: 2025

Type: article

Abstract: Aggregate trading by Chinese institutional investors, trading for mutual funds and private funds are positively associated with stock volatility. In contrast, the dealers trading exhibits a negative association with stock volatility. These results highlight heterogeneity in the impact of institutional trading on stock volatility. The relationship between Chinese institutional investor trading and stock volatility is time-varying, differing significantly between bull and bear market periods. We find no evidence that the unexpected components of mutual funds and private funds trading convey more information than their expected components. Our findings suggest that Chinese institutional investors do not possess an informational advantage and are unable to stabilize the market.

Source: Applied Economics

DOI: 10.1080/00036846.2025.2539529

Authors: Zhijuan Chen, Wei Liu, Changfeng Ma, Shunming Zhang

Institutions: Zhejiang Gongshang University, Shanghai Stock Exchange, Shanghai National Accounting Institute, Renmin University of China

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: National Natural Science Foundation of China

Award: G5598861580