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Investor trading behaviour and stock price crash risk
Author(s) -
Zhou Liyun,
Huang Jialiang
Publication year - 2019
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1659
Subject(s) - lottery , crash , stock (firearms) , financial economics , systematic risk , economics , business , stock market , stock price , monetary economics , stock market crash , microeconomics , series (stratigraphy) , computer science , biology , programming language , mechanical engineering , paleontology , horse , engineering
Abstract This paper sheds new light on the relation between investor trading behaviour and crash risk to examine how investors react to stocks with lottery features in Chinese Stock Market. We find that investor trading behaviour has a greater impact on stocks with higher crash risk, which implies that investors overreact to stocks with higher stock price crash risk. Furthermore, investor trading behaviour has strongest effects on stocks with highest crash risk and highest idiosyncratic risk and has weakest effects on stocks with lowest crash risk and lowest idiosyncratic risk, which indicates that investors gamble lottery‐like stocks with high crash risk and high idiosyncratic risk. Collectively, these results support a role for investor trading behaviour in the formation of stock returns.