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How do investors' risk preferences influence the relationships between investors' online channel use intensity and both their trading behaviors and performance? This study answers this important question even as investors are increasingly rely on the Internet for their trading activities. We leverage rare and unique micro-level historical dataset from more than 7,000 investor accounts over a 44-month period between 2010 and 2013 at a large brokerage firm in China. The dataset and analyses enable us to provide new insights into how investors' online channel use intensity and risk preferences jointly influence their trading behaviors and performance, even though some other aspects of financial markets have changed considerably over the years. The findings reveal that although online channel use intensity is associated with increased trading volume, trading frequency, and investment returns, these effects differ across investors with different risk preferences. We find that while online channel use intensity has strong positive effects on transaction frequency for both risk-seeking and risk-averse investors, it has a much lower effect on trading volume for risk-averse investors than for risk-seeking investors. We further find that risk-averse investors with higher online channel use intensity outperform investors with other risk preferences in terms of investment performance. This paper contributes to the emerging literature at the intersection of information systems and behavioral finance by revealing the moderating role of risk preferences in the relationships between investors' online trading channel use intensity and both their trading behaviors and outcomes. We discuss the implications for research and practice. [ABSTRACT FROM AUTHOR]

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Long-term reversals in U.S. stock returns are better explained as the rational reactions of investors to locked-in capital gains than an irrational overreaction to news. Predictors of returns based on the overreaction hypothesis have no power, while those that measure locked-in capital gains do, completely subsuming past returns measures that are traditionally used to predict long-term returns. In data from Hong Kong, where investment income is not taxed, reversals are nonexistent, and returns are not forecastable either by traditional measures or by measures based on the capital gains lock-in hypothesis that successfully predict U.S. returns. [ABSTRACT FROM AUTHOR]

Abstract Using stock market returns of two stock exchanges in China, this paper employs MF-DCCA to investigate the non-linear cross-correlation between individual investor sentimentand Chinese stock market return. We find that there exists a power-law cross-correlation between individual investor sentiment and Chinese stock market return, and the cross-correlations are significantly multifractal. In addition, the cross-correlation between individual investor sentiment and Shenzhen Component Index (SZSE) return is more anti-persistent than that between individual investor sentiment and Shanghai Composite Index (SSEC) return, implying that individual investor sentiment has a stronger impact on small stocks. Besides, long-range correlations, fat-tailed distribution and extreme value all contribute to the multifractality for cross-correlation between individual investor sentiment and SSEC return, while long-range correlation is the main source of multifractality for the cross-correlation between individual investor sentiment and SZSE return. Highlights • Cross-correlation between investor sentiment and stock return is investigated. • Yu'ebao Sentiment Index and Shenzhen stock market return is more anti-persistent. • The sources of multifractal features are investigated. [ABSTRACT FROM AUTHOR]

In this paper, we advocate the provincial TV audience rating as the novel proxy for the provincial investor sentiment (PIS) and investigate its relation with stock returns. The empirical results firstly show that the PIS is positively related to stock returns. Secondly, we provide direct evidence on the existence of home bias in China by observing that the provincial correlation coefficient is significantly larger than the cross-provincial correlation coefficient. Finally, the PIS can explain a large proportion of provincial comovement. To sum up, all these findings support the role of the non-traditional information sources in understanding the “anomalies” in stock market. [ABSTRACT FROM AUTHOR]

This study empirically examines the investment value of security analysts' industry-specific trading recommendations on China's stock market. Two questions are raised: whether investors can profit from the Chinese stock market by following those analyst recommendations; and whether buying (or selling) those recommended stocks could yield a higher return than the market during the same period of time. We conduct this research based on the database from EASTMONEY, which is the most frequently visited website providing professional information regarding market performance and share trading issues in China. We examined the trading history of the market from 2011 to 2013, and identified a total of 32440 recommendations issued by professional Chinese brokerage houses regarding 44 industries. Calendarbased portfolios are set up to evaluate the performance of those industries one day, one week, one month, half a year, and a year after the trading recommendations were released. It is found that industries with favorable recommendations in general outperform those with unfavorable recommendations and this performance discrepancy tends to magnify over time. If following the analysts' recommendations to buy and sell, shareholders are likely to profit in the mid- to long-run, and those stocks pertain to an industry with favorable (unfavorable) recommendations tend to outperform (underperform) the benchmark indices in the mid- to long-run as well. This study provides a novel attempt to assess the characteristics, and to an extent, the institutional efficiency of the share market in the world's largest developing country from an industry-specific perspective. [ABSTRACT FROM AUTHOR]

Purpose -- The purpose of this paper is to study how the market correlation changes in Chinese stock market and how the market correlation affects stock returns. Design/methodology/approach -- The authors first examine the relationship between the market correlation and the market return. Then, the authors run formal multiple regressions to see whether correlation risk is priced in security returns. Findings -- The authors find that market correlation increases when the market index falls down. Though market correlation risk is partly influenced by macroeconomic shocks, volatility risk, liquidity risk and higher moment risk, market correlation contains unique information that measures the benefit investors gain from diversification strategies. The market correlation risk is negatively priced. This conclusion remains valid even if the authors have considered the influence of other risk factors and the impact of conditional information. Research limitations/implications -- Subjected to the limited history of the Chinese stock market, the authors cannot use more accurate and specific empirical methodology to fulfill the empirical research. And this renders further study. Originality/value -- This research provides empirical evidence in a new data sample and it sheds lights on correlation strategies for institutional investors in China. [ABSTRACT FROM AUTHOR]

We document a prominent abnormal stock return of -14% during the [-120, +20] day window around 482 lockup expirations in the split-share structure reform in China. The abnormal stock returns (selling volumes) are positively (negatively) correlated with firm information transparency and postreform performance improvement, but negatively (positively) related to the level of agency problems, suggesting the existence of information-based trading during the lockups. We present important evidence that institutional investors, especially mutual funds, possess superior information discovering capabilities than that of individual investors. Our findings confirm the information roles of lockups as a tool to signal firm quality and a commitment device to alleviate agency problems. [ABSTRACT FROM AUTHOR]

Previous studies find mixed results on the relation between exchange rate movements and stock returns. We revisit the issue by exploring the effect of market efficiency and heterogeneous investors' reaction to exchange rate changes using the unique event of Chinese currency appreciation. Our results show that different investor groups react differently to exchange rate appreciation. In addition, we find that investors with limited investment opportunities react more positively to exchange rate appreciation. Our results suggest that the issues of market efficiency and the differences among investors are important factors to consider when one analyzes the relation between exchange rate movements and stock returns. [ABSTRACT FROM AUTHOR]

The main agency problem in the Chinese economy comes from a conflict between strong controlling shareholders and weak minority shareholders. In such economy, seasonal equity offerings (SEOs) are used as a means to exploit minority shareholders. This paper examines the effects of a regulation (the classified voting system [CVS]) that attempts to protect the interests of minority shareholders by excluding controlling shareholders from the voting process of SEOs. This results show that the rejection rate significantly increases after the CVS comes into effect. SEOs proposals are more likely to be rejected when perceived private benefits are high and security benefits are low, and when minority shareholders have higher bargaining power. Further, investors receive significantly higher post-SEO stock returns for SEOs approved under the CVS than for those approved before the CVS. [ABSTRACT FROM AUTHOR]

This article examines earned returns and allocation details of more than 200 new offerings (Initial Public Offering, IPO) from companies that went public in Hong Kong during the period 1988 to 1995. Three distinct groups of investors are identified, each exhibiting a particular type of return's pattern. Each pattern seems to correspond to a specific level of information. This finding is of particular interest as it shows the level of return that an investor can expect from IPO investments, also being an extension of previous studies where, following Rock (1986), two, not three, groups of investors are identified. This article also finds that expected returns from IPOs remain positive and highly significant after adjusting for the allocation bias. With the exception of the smallest application sizes, results are invariant to adjustments such as transaction costs and the risk-free rate of return. [ABSTRACT FROM AUTHOR]

The article presents a study which examines the importance and performance of infrastructure in China from 1995-2006. The study uses risk-adjusted performance analysis to determine the added value of infrastructure development and its portfolio diversification benefits to commercial property and international private infrastructure investors. Results show that the infrastructure in China has provided significant risk-adjusted returns and some loss of diversification benefits in the portfolio. Moreover, it says that effective infrastructure and commercial property markets are important to international investors to boost their exposure to infrastructure and commercial property markets in the country as well as their international investment portfolios.

This study examines a risk/return mismatch of the MSCI China Index, which has offered investors low returns and high volatility, yet remains a favorite within the global investors' portfolio. The paper suggests several insights, both from behavioral and traditional finance perspectives, to explain this mismatch. An international risk decomposition model is applied to separate the total risk of China's index return into global systematic risks, regional systematic risks and country specific risks. It suggests the index's lower than average systematic risk might be one of the explanations for its risk/return mismatch. The study also finds that the China Index's systematic risks, both global and regional, have been increasing, but more so at the global level. [ABSTRACT FROM AUTHOR]

This study revisits the risk-return relationships in the Hong Kong stock market using a conditional model based on up and down markets. Beta is found significantly and positively (negatively) related to realized returns when the market excess returns are positive (negative). The same results are found for unsystematic risk, total risk and kurtosis of stock returns during up and down markets when they are added to the model. Furthermore, skewness is significantly but negatively (positively) related to realized returns during up (down) markets. These results indicate that other risk measures in addition to beta are also important in pricing risky assets and investors do not hold diversified portfolios in this market. Moreover, the results support investors’ preference that they prefer positive skewness but dislike kurtosis. [ABSTRACT FROM AUTHOR]

Presents information on managing risks of private equity investing in China. Why the country is a hot destination for global venture capital; How the inefficiencies of the markets in China make investing a risk despite the huge economic growth; Lack of information that would tell how many venture capitalists and private equity investors have made money in the Chinese market; Suggestion that investors should look at a shorter exit window than they would in the United States; Role of Chinese regulations and how they effect foreign investors; Advice t6o focus on later-stage deals; Look at venture capital opportunities in the government sector; Passive versus active investors; Co-investing which is not encouraged with governmental affiliated investment funds; Management of risks and return on investment.