Institutional investors’ ownership stability and their investee firms’ equity mispricing

This study examines the impact of institutional investors' equity ownership stability and their investment horizon to determine the impact on their investee firms' equity mispricing. Mispricing represents the difference between a firm’s market and fundamental values. We treat institutional investors as a heterogenous group, i.e., dedicated, transient, or quasi-indexer as defined by Bushee, 1998, Bushee, 2001 since their categorization determines their trading strategy. Higher institutional ownership, higher stability in institutional investors' equity ownership, and institutional investors classified as long-term are all associated with lower equity mispricing at investee firms.     

Institutional investors' attention to environmental information,trading strategies,and market impacts: Evidence from China

Using a large proprietary database of intraday high‐frequency trading, we investigate the trading strategies of institutional investors in dealing with the negative environmental event disclosure of listed companies and their impact on markets, aiming to reveal the mechanism of the lack of “green efficiency” in China's capital market from the perspective of institutional investors. The results show that institutional investors react to negative environmental events prior to the announcements, indicating premature information leakage in the market; in addition, their trading behaviors mitigate the immediate effect of negative environmental event announcements on stock price. After the event is disclosed, institutional investors engage in short‐term selling and long‐term buy and hold. This trading strategy undermines the irrational selling of individual investors in the event of disclosure, short‐term decline in stock price, and long‐term reversal of market overreaction. In a China context, institutional investors generally take environmental information into consideration. However, they fail to recognize the long‐term value effect of negative environmental events and instead cater to trading strategies towards market volatility.     

Institutional investors' corporate site visits and aggressive financial reporting

This paper investigates the impact of institutional investors' corporate site visits on financial reporting aggressiveness. While prior research has shed light on the monitoring impact of institutional shareholding on firms' financial reporting practices, institutional investors' preference regarding financial reporting remains unclear. Using a sample of Chinese firms listed on the Shenzhen Stock Exchange from 2012 to 2019, we find that institutional investors' on-site visits significantly increase financial reporting aggressiveness of hosting firms. The on-site visit effect is more salient in firms that are more sensitive to the influence of institutional investors, for example, firms with a less powerful chief executive officer, financially constrained firms, and firms operating in competitive industries. Our study highlights that under a setting of weak minority shareholder protection such as in China, managers are likely to recognize revenue aggressively to please powerful shareholders who paid intensive attention to them.     

Retail investors’ trading and stock market liquidity

The paper investigates the relation between retail investors’ participation in trading and aggregate stock market liquidity. The findings show a positive and significant relation between retail investors’ trading and stock market liquidity. Examination of the determinants of retail investors’ trading reveals that, on average, retail investors with more diversified trading activity tend to trade when liquidity is higher, the frequency of their arrival to the market is not affected by the level of liquidity, and retail investors are willing to trade at a lower liquidity level as sellers than as buyers. Moreover, retail investors’ trading does not create price noise at the aggregate market level. Overall, the evidence suggests that retail investors contribute to market quality.     

Trade credit financing and stock price crash risk

This study investigates the association between trade credit financing and stock price crash risk within China's context. We find that firms using more trade credit financing have significantly lower future stock price crash risk. This negative association is more pronounced for firms with greater information asymmetry and for firms located in less developed financial markets. This finding is robust to the endogeneity concern, alternative measures of stock price crash risk, and the inclusion of other factors identified in prior studies that might affect stock price crash risk. Further evidence suggests that both the monitoring mechanism and the disclosure mechanism drive the documented relation. Our study suggests that access to trade credit can significantly reduce the likelihood of crash risk in a country like China with less developed formal bank financing. Our study also suggests that investors can effectively avoid stock price crash risk by using the trade credit information disclosed in financial statements.     

Funding liquidity risk and the low-volatility anomaly: Evidence from the Taiwan stock market

We investigate whether the funding liquidity risk to institutional investors influences the negative relation between expected returns and variance (the ‘‘Low-volatility anomaly’’). With the Taiwan stock market as a setting, we implement a multivariate Markov switching model and use the funding liquidity risk to model the time-varying transition probabilities of the regime-switching process to capture changes in the funding liquidity risk regime. Our evidence documents that the low-volatility anomaly is most pronounced when there is high funding liquidity risk. When there is low funding liquidity risk, however, the low-volatility anomaly has a significant reversal. These results imply that the increased funding liquidity risk due to financial shock transmitted from parent banks is associated with higher selling pressure on institutional investors’ high-volatility stocks, leading to the low-volatility anomaly.     

互联网基金对股票市场的影响——基于大数据情绪指数的实证研究

投资者在进行投资决策时易受到自身情绪的影响，并且投资者行为是影响金融市场间波动溢出的直接原因。运用文本挖掘技术对新浪微博2014年4月至2016年7月的博文进行文本分析和随机森林主成分分析并构建微博大数据投资者情绪指数，根据投资者情绪指数研究互联网基金市场对股票市场的影响，结果表明互联网基金市场对股票市场具有波动溢出效应。     

股价崩盘风险、信息环境与企业现金调整

以我国2009—2016年沪深上市公司数据为样本，探究了股价崩盘风险、信息环境对企业现金调整的影响。研究发现：股价崩盘风险越大，企业现金调整速度越快，且这种正相关关系对于分析师跟踪数量较少、机构投资者持股比例少的企业而言更为显著。进一步考察股权性质在企业现金调整速度中的影响，发现国有企业与民营企业面对股价崩盘风险的现金调整速度并不具有显著差异，但是对于民营企业而言，更多的分析师跟踪和机构投资者持股将显著降低企业应对股价崩盘风险的现金调整速度，信息环境对于国有企业的作用并不显著。     

Investor heterogeneity and commonality in stock return and liquidity

This paper examines how the trading activities of different investor types are related to common return and liquidity movements. Using a unique dataset, we decompose the daily return and liquidity of individual stocks into price impact components attributable to trades of institutional investors and retail investors. We then investigate the variation of each component relative to market-wide return and liquidity. We show that institutional trades contribute more than retail trades to liquidity commonality. However, retail trades contribute more strongly to return co-movement. The incremental contribution of retail trades to the co-variability of stock returns is more pronounced for firms with high information asymmetry.     

Investor co-attention and stock return co-movement: Evidence from China’s A-share stock market

This study attempts to link investor co-attention to stock return co-movement in China's A-share stock market. On the one hand, stock price will co-move for stocks within the same industry and within the same market, which is labelled “return co-movement”. On the other hand, investor attention will also co-move as investors systematically search for relevant information for stocks of similar characteristics or as the stocks experience common information shocks, which is termed “investor co-attention”. The empirical evidence suggests that stock return co-movement can be explained by investor co-attention to a great extent, even after controlling for stock fundamentals and firm characteristics, and this effect is more salient for stocks with lower institutional ownership. Moreover, we employ large national lottery jackpots as exogenous shocks to investor attention. The empirical findings show that the co-movement of both investor attention and stock return increase on large lottery jackpot days, while investor co-attention contributes less to return co-movement on large lottery jackpot days. In summary, we offer an alternative explanation for return co-movement by observing the causal relationship between investor co-attention and stock return co-movement.     

机构投资者羊群行为动因分析——2009年数据实证

羊群行为作为机构投资者的一种普遍非理性行为,对我国的股票市场产生重大影响。羊群行为对短期股价波动会产生较大的影响,同时在一定程度上破坏股价的长期稳定。本文首先对羊群行为进行界定,然后旨在通过数据对证券投资基金的羊群行为进行实证,并分析其主要动因,最后针对其成因提出弱化机构投资者羊群行为的措施。     

The sentiment pricing dynamics with short-term and long-term learning

Combining the behavioral characteristics of rational uninformed investors with learning information behavior of sentiment investors, this paper establishes a mathematical model about the impact of learning information behavior on the investor's transaction and asset equilibrium price under asymmetric information. Research shows that when rational uninformed investors learn information in the short term, on the one hand, they choose to bet against sentiment investors, thus reducing the influence of sentiment; on the other hand, they occasionally mistake sentiment for information to chase sentiment investors, then amplifying sentiment shocks. Furthermore, sentiment investors can also gain valuable information indirectly by observing the price in the long term. When sentiment investors learn information in the long term, the price fluctuations caused by sentiment and information, informativeness of the price system and market efficiency are no longer dependent on the quality of information.     

Individual stock sentiment beta and stock returns

Using the data in Chinese stock market, we measure the individual stock sentiment beta, which is defined as the sensitivity of individual stock returns to the individual stock sentiment changes. We demonstrate that stocks in the highest individual stock sentiment beta portfolio have significantly higher excess returns, CAPM alpha, Fama-French three-factor alpha and Fama-French five-factor alpha. Besides, we find that the high individual stock sentiment beta stocks are smaller, younger, more volatile stocks with higher price and higher market beta. After controlling for firm characteristic, the returns of High-Low individual stock sentiment beta portfolios are still significantly positive. Moreover, we show the effect of the individual stock sentiment beta on stock returns is positive and significant in different stock markets, in different sample periods, and in bull and bear market. Besides, the results of the Bayes-Stein individual stock sentiment beta are still stable.     

多元化程度与盈余持续性:机会抑或威胁?

基于资源基础观与代理理论，利用我国A股上市公司2011—2017年的数据，探讨企业多元化经营对盈余持续性的影响。研究表明，企业多元化显著降低了盈余持续性，且多元化程度越高，企业的盈余持续性越低；这一负向关系在非沉淀性组织冗余水平高、市场竞争地位高以及机构投资者持股比例高的企业中得到缓解，而沉淀性组织冗余则会强化上述关系。研究结论为多元化企业调整资源结构、加强市场竞争力以及资本市场参与者理解企业盈余信息提供参考。     

The Power of Stakeholders' Voice: The Effects of Social Media Activism on Stock Markets

Building on social movement theory, this study assesses the influence of social media activism on the stock market performance of targeted firms. We focus on information published on Twitter by two critical stakeholders: consumer associations and trade unions. To the extent that social media represent a valid medium to mobilize stakeholders' activism, protests on Twitter may damage firm reputation, leading to capital market reactions. Using a corpus of over 1.5 million tweets referring to Spanish listed banks, we study the impact of activism by looking at targeted firms' abnormal variations in price and trading volume. Our findings suggest that the Twitter activism of key stakeholders has a significant impact on investors' decisions. Further, our empirical analyses indicate that the mechanisms affecting investors' behavior differ depending on the characteristics of the stakeholder group. Hence, this study contributes to understanding how social movements influence corporate behavior via social media. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

Information asymmetry,sentiment interactions,and asset price

We develop an asset pricing model with sentiment interactions between institutional and individual investors under the condition of information asymmetry. Our model considers private information and investor sentiment, two imperfections in securities markets, and integrates them into a theoretical model to investigate the role of the interaction between information asymmetry and investor sentiment in asset pricing. We show that the joint effect of private information and investor sentiment deviate the price of risky assets and efficiently explains anomalies in the stock market. Investor sentiment changes the effect of information on the equilibrium price relative to a world where all investors are completely rational. Private information changes the effect of investor sentiment on the equilibrium price in comparison with a scenario with symmetric market information. In addition, the individual investors’ learning and the disclosure of information both allow private information to be better integrated into the price and simultaneously changes the effect of investor sentiment on the equilibrium price.     

Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market?

This paper examines the impact of gross foreign equity inflows on aggregate liquidity of the Malaysian stock market using newly assembled foreign trading data and the best performing bid-ask spread proxy. Employing vector autoregression, we discover a one-way causality from gross inflows to aggregate liquidity, and foreign investors erode liquidity of the Malaysian stock market. Additional analyses reveal that uncertainties in the U.S. markets negatively affect aggregate liquidity through the flows of foreign institutions, whose positive feedback trading destabilizes the local bourse. Despite the shocks, there is sufficient liquidity provision from local state-backed institutional funds and local proprietary day traders.     

Media Content,Accounting Quality,and Liquidity Volatility

We examine how the linguistic content of news items affects the volatility of a firm's liquidity, and we consider whether accounting quality moderates the media content-liquidity volatility relation. Regarding the unconditional relation between media content and liquidity volatility, one view is media content could reduce liquidity volatility by providing additional information about fundamental values; another view is it could increase liquidity volatility by increasing investor uncertainty, particularly for negative news. Using data from Thomson Reuters News Analytics, we find evidence supporting the view that media content, positive and negative, has incremental information. Regarding the moderating role of accounting quality, pre-existing accounting information of higher quality could enhance investors' reactions to media content by providing a more precise baseline, or it could reduce investors' reactions to the news if investors anchor on higher quality financial statements. Our findings are consistent with more credible accounting information serving an anchor role, and suggest that investors condition their reaction to media content based on the quality of a firm's pre-existing accounting information.     

The impact of China's stock market reforms on its international stock market linkages

This paper investigates how China's stock market reforms have affected the stock market linkages between China and Korea, Japan and the US respectively. We firstly use a 4 × 4 asymmetric GARCH-BEKK model and a series of likelihood ratio tests to uncover China's regional and global linkages between 1992 and 2010 and during three sub-periods representing the stages of the Chinese reforms. The results show that Chinese stock market is linked to these overseas markets and the reforms permit spillovers to these markets from China. The subsequent regression analyses of the time-varying conditional correlations, in the presence of growing economic integration, exchange rate risk and financial turbulence, further indicate that the interdependences between China and the regional markets increase due to the implementation of liberalisation policies. However, the correlation between China and the global market remains weak even though this correlation responds positively to the institutional reforms on China's stock market additionally.     

The momentum and reversal effects of investor sentiment on stock prices

In this paper, we illustrate the real function relationship between the stock returns and change of investor sentiment based on the nonparametric regression model. The empirical results show that when the change of investor sentiment is moderate, the stock return is positively correlated with the change of investor sentiment, presenting an obvious momentum effect. However, the stock return is negatively correlated with the change of investor sentiment if the change of investor sentiment is dramatic, presenting significant reversal effects. Moreover, the degree of reversal effect caused by extremely optimistic sentiment is greater than that driven by extremely pessimistic sentiment, which shows a significant asymmetry. Our findings offer a partial explanation for financial anomalies such as the mean reversion of stock returns, the characteristic of slow rise and steep fall in China's stock market and so on.