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Information asymmetry, cluster trading, and market efficiency: Evidence from the Chinese stock market

Author

Listed:
  • Yingyi Hu
  • Jean-Luc Prigent

    (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

Abstract

This study investigates the effect of asymmetry information and illiquidity related to cluster trading on information integration efficiency in the Chinese stock market. The results show that information asymmetry and illiquidity related to cluster trading both negatively affect market efficiency in the Chinese stock market. While the effect of information asymmetry on market efficiency dominates in the informational period, the effect of illiquidity related to cluster trading dominates in other periods, when trading is less concentrated. Noise trading has a positive effect on market efficiency by greatly reducing the illiquidity related to cluster trading; however, its effect on information asymmetry is not significant. Our results provide insight into investors’ trading strategies.
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Suggested Citation

  • Yingyi Hu & Jean-Luc Prigent, 2019. "Information asymmetry, cluster trading, and market efficiency: Evidence from the Chinese stock market," Post-Print hal-03679410, HAL.
    • Handle: RePEc:hal:journl:hal-03679410
    DOI: 10.1016/j.econmod.2018.04.001
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    Cited by:

    1. OlaOluwa S. Yaya & Oluwasegun B. Adekoya & Xuan Vinh Vo & Mamdouh Abdulaziz Saleh Al‐Faryan, 2024. "Stock Market Efficiency in Asia: Evidence from the Narayan–Liu–Westerlund's GARCH‐based unit root test," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 91-101, January.
    2. Guo, Yongzhen & Wang, Yinghuan, 2024. "It is a small world: The effect of analyst-media school ties on analyst performance," International Review of Financial Analysis, Elsevier, vol. 94(C).
    3. Yaya, OlaOluwa S. & Vo, Xuan Vinh & Adekoya, Oluwasegun B., 2021. "Market Efficiency of Asian Stocks: Evidence based on Narayan-Liu-Westerlund GARCH-based Unit root test," MPRA Paper 109828, University Library of Munich, Germany.
    4. Arumugam, Devika, 2023. "Algorithmic trading: Intraday profitability and trading behavior," Economic Modelling, Elsevier, vol. 128(C).
    5. Sun, Kaisi & Wang, Hui & Zhu, Yifeng, 2024. "What drives the tail risk effect in the Chinese stock market?," Economic Modelling, Elsevier, vol. 132(C).
    6. Chen, An & Li, Hong & Schultze, Mark B., 2023. "Optimal longevity risk transfer under asymmetric information," Economic Modelling, Elsevier, vol. 120(C).

    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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