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Extrapolative Bubbles and Trading Volume

delete2021-06-18
delete21
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OA
AI
J
Jingchi Liao
C
Cameron Peng *
朱
朱宁 (Ning Zhu)
DOI：10.1093/rfs/hhab070delete
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Abstract

Abstract

En 中文
We propose an extrapolative model of bubbles to explain the sharp rise in prices and volume observed in historical financial bubbles. The model generates a novel mechanism for volume: because of the interaction between extrapolative beliefs and disposition effects, investors are quick to not only buy assets with positive past returns but also sell them if good returns continue. Using account-level transaction data on the 2014-2015 Chinese stock market bubble, we test and confirm the model's predictions about trading volume. We quantify the magnitude of the proposed mechanism and show that it can increase trading volume by another 30%.
Keywords:
INVESTORS TRADE
MODEL
OVERCONFIDENCE
BEHAVIOR
PRICES
MARKET

Journal

Review of Financial Studies cover
Review of Financial Studies
IF:
5.4
Papers:
2.8K
Citations:
3.0W

Organization

L
London School Economics and Political Science
Scholars:
3.8K
Papers: 3.2K
Citations: 40
S
shenzhen stock exchange (szse)
Scholars:
17
Papers: 22
Citations: 0
U
university of london
Scholars:
21.5W
Papers: 19.7W
Citations: 305
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