Education, Science, Technology, Innovation and Life
Open Access
Sign In

Investor Sentiment, Institutional Ownership and Liquidity: Evidence from China

Download as PDF

DOI: 10.23977/ferm.2023.061016 | Downloads: 21 | Views: 539

Author(s)

Na Song 1, Ebenezer Appiah 1

Affiliation(s)

1 School of Management and Economics, University of Electronic Science and Technology of China, Chengdu, China

Corresponding Author

Na Song

ABSTRACT

The study investigates the influence of investor sentiment (IS) on stock liquidity in the Chinese stock market. The study also examines the moderating effect of institutional investor shareholding ratio on stock liquidity.  We utilized daily panel data in Chinese stock market from 2020-2022. We adopted the dynamic fixed technique to analyse the data; the study reveals a negative relationship between IS and stock liquidity. Also, our result portrays a significant interaction effect between investor sentiment (IS) and stock liquidity. However, it was further discovered that the moderating effect of institutional investor shareholding ratio and IS enhances stock liquidity. Lastly, we discuss the policy implications of our results, including how vital stock market players should bridge the communication gap between institutions and investors in other to limit the circulation of false news which raises IS in other to improve stock liquidity.

KEYWORDS

Investors sentiment; Institutional ownership; Liquidity

CITE THIS PAPER

Na Song, Ebenezer Appiah, Investor Sentiment, Institutional Ownership and Liquidity: Evidence from China. Financial Engineering and Risk Management (2023) Vol. 6: 118-124. DOI: http://dx.doi.org/10.23977/ferm.2023.061016.

REFERENCES

[1] Chen, Z., Du, J., Li, D., & Ouyang, R. (2013). Does foreign institutional ownership increase return volatility? Evidence from China. Journal of Banking & Finance, 37(2), 660-669.
[2] Baker, M. & Wurgler, J. (2006). Investor sentiment and the cross‐section of stock returns. The journal of Finance, 61(4), 1645-1680.
[3] Debata, B., Dash, S. R., & Mahakud, J. (2018). Investor sentiment and emerging stock market liquidity. Finance Research Letters, 26, 15-31.
[4] Brown, G. W., & Cliff, M. T. (2004). Investor sentiment the near-term stock market. Journal of empirical finance, 11(1), 1-27.
[5] Kyle, A. S. (1985). Continuous auctions and insider trading. Econometrica: Journal of the Econometric Society, 1315-1335.
[6] Cooper, M. J., Gutierrez Jr, R. C., & Hameed, A. (2004). Market states and momentum. The journal of Finance, 59(3), 1345-1365.
[7] Chordia, T., Roll, R., & Subrahmanyam, A. (2001). Market liquidity and trading activity. The journal of finance, 56(2), 501-530.
[8] Tetlock, P., Visser, P., Polifroni, R., Scott, A., Elson, S., Mazzocco, P. and Rescober P., (2007). People as intuitive prosecutors: The impact of social-control goals on attributions of responsibility. Journal of Experimental Social Psychology, 43(2), 195-209.
[9] Chen, J., Jiang, F., Liu, Y., & Tu, J. (2017). International volatility risk and Chinese stock return predictability. Journal of International Money and Finance, 70, 183-203.
[10] Wang, M. S. (2022). Shareholder Disputes and Commonality in Liquidity: Evidence from the Equity Markets in China. Asia-Pacific Financial Markets, 29(2), 291-325.
[11] Boehmer, E., Jennings, R. & Wei, L., (2007). Public Disclosure and Private Decisions: Equity Market Execution Quality and Order Routing. Review of Financial Studies, 20(2):315-358.
[12] Hendershott, T., & Menkveld, A. J. (2014). Price pressures. Journal of Financial economics, 114(3), 405-423.
[13] Yin, H., Wu, X., & Kong, S. X. (2020). Daily investor sentiment, order flow imbalance and stock liquidity: evidence from the Chinese stock market. International Journal of Finance & Economics, 27(4), 4816-4836.

Downloads: 27444
Visits: 542895

All published work is licensed under a Creative Commons Attribution 4.0 International License.

Copyright © 2016 - 2031 Clausius Scientific Press Inc. All Rights Reserved.