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The Impact of COVID-19 on the Relation Between Retail Investors' Trading and Stock Returns in the Chinese Market

Author

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  • Tao Bing

    (School of Finance, Capital University of Economics and Business, China)

Abstract

This paper investigates the relation between retail investors’ flows and returns during the COVID-19 pandemic in the Chinese market using the VAR model. The results show that though the positive feedback trading during the pandemic is weaker than that in the pre-COVID-19 period, the positive feedback trading following negative returns during the crisis is much stronger than that in the pre-COVID-19 period. This implies panic trading.

Suggested Citation

  • Tao Bing, 2021. "The Impact of COVID-19 on the Relation Between Retail Investors' Trading and Stock Returns in the Chinese Market," Asian Economics Letters, Asia-Pacific Applied Economics Association, vol. 2(1), pages 1-7.
    • Handle: RePEc:ayb:jrnael:29
    DOI: 2021/08/10
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    References listed on IDEAS

    as
    1. Samarakoon, Lalith P., 2009. "The relation between trades of domestic and foreign investors and stock returns in Sri Lanka," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 850-861, December.
    2. Vo, Xuan Vinh, 2017. "Trading of foreign investors and stock returns in an emerging market - Evidence from Vietnam," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 88-93.
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    Cited by:

    1. Bing, Tao & Ma, Hongkun, 2021. "COVID-19 pandemic effect on trading and returns: Evidence from the Chinese stock market," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 384-396.
    2. Rizvi, Syed Aun R. & Pathirage, Kasun, 2023. "COVID-19 policy actions and inflation targeting in South Asia," Journal of Asian Economics, Elsevier, vol. 84(C).
    3. Behera, Harendra & Gunadi, Iman & Rath, Badri Narayan, 2023. "COVID-19 uncertainty, financial markets and monetary policy effects in case of two emerging Asian countries," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 173-189.
    4. Liu, Yun & Zhang, Yun & Zhang, Yifei & Xiao, He, 2022. "Small business owners’ Fintech credit in crises: Theory and evidence from farmers under the COVID-19," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    chinese stock market; positive feedback trading; retail investors; covid-19;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • I1 - Health, Education, and Welfare - - Health

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