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Whether fund-dominant accounts take advantage of investors’ attention: based on individual investors’ account-level trading data of the top-ranking listed stocks from a security company

LIU Liya1 JIN Zhengxuan1 CHEN Ruihua1

(1.School of Finance, Shanghai University of Finance and Economics, Shanghai, China 200433)

【Abstract】 Investors’ attention is limited. When investors have limited access to information resources, those events that attract investors’ limited attention in the stock market could usually affect their investment decisions. Some literature argued that to some extent, if a stock is listed on today’s top ranking list, the listing event could create a short-term momentum in its price. Since the ranking list can be noticed by anybody, the individual investor who possesses fund dominance could create the same kind of listing event artificially and manipulate other investors’ attention. To clearly test and examine this motivation, this paper firstly explained the theoretical mechanism of how fund-dominant accounts profit from pumping up the stock price and selling it in the next day by taking advantage of investors’ attention. And then, this paper chose China’s A-share stocks which are listed on the top ranking list only because its price movement deviation hit 7% on that day as the sample, and the time span is from January 2015 to July 2019. Thanks to the availability of account-level data from a China security company, a name list of suspicious speculative fund-dominant accounts was found. Through the empirical test of the relationship between the speculation of these fund-dominant accounts and the selling decision of the next day, this paper has the following findings. First, there indeed exist speculation and price manipulation activities driven by fund-dominant accounts which can be concluded as a “one-day tour” trading pattern. Second, when the stock is listed on the top ranking list, the higher the dominance of a fund-dominant account speculation, the stronger the positive relationship between the speculation intention and the next day’s selling decision. Third, the information disclosure mechanism of the top ranking list can capture the accounts which conduct stock speculation and have a strong tendency of “one-day tour.” From the perspective of the causes behind the attention events in China’s stock market, this paper studied the speculation behavior of fund-dominant accounts, and provided micro evidence for the research on investors’ attention, asset pricing and trade-based price manipulation. Also, this paper contributed to the research on the public information disclosed by stock exchanges, and provided implications for the supervisor and the stock exchange to further improve the governance system of the stock market.

【Keywords】 attention; stock speculation; investor behavior;

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ISSN:1001-9952

CN: 31-1012/F

Vol 46, No. 06, Pages 94-109

June 2020

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