Yunbi An , Zhao Chen , Clement Man Yiu Liu , Qingfu Liu , Chuanjie Wang
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引用次数: 0
Abstract
We study the trading behavior of boundedly rational investors chasing cross-border capital flow in the context of the Shanghai-/Shenzhen-Hong Kong Stock Connect program. The capital flow from Hong Kong to mainland China via this channel, referred to as northbound capital flow (NCF), is widely recognized as smart money in China. We find that mainland Chinese investors exhibit a strong tendency to herd toward stocks with substantial net NCF flows, and investors are especially prone to herd around trade-oriented NCF that pursues short-term gains. We show that the herd behavior is due to enhanced investor sentiment induced by substantial NCF flows. In addition, NCF outflows lead to a more pronounced herding effect, and investment clustering in small-cap stocks is more prominent. Moreover, market panic and the dispersion of stock information mitigate investor herd behavior. Our research provides new insight into the economic consequences of cross-border capital flows in emerging market countries.
期刊介绍：
Since its launch in 1982, Journal of International Money and Finance has built up a solid reputation as a high quality scholarly journal devoted to theoretical and empirical research in the fields of international monetary economics, international finance, and the rapidly developing overlap area between the two. Researchers in these areas, and financial market professionals too, pay attention to the articles that the journal publishes. Authors published in the journal are in the forefront of scholarly research on exchange rate behaviour, foreign exchange options, international capital markets, international monetary and fiscal policy, international transmission and related questions.
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