Journal of Banking & Finance Vol. 101 2019
Why investors do not buy cheaper securities: Evidence from a natural experiment
Abstract
We examine the trading behavior of Chinese domestic investors after they were given access to the B-share market in 2001. Surprisingly, we find that only 2% of investors began buying B shares. Even among these 2%, investors were less likely to buy B shares if they had more experience in the A-share market, and vice-versa. Thus, prior market experience limits the extent to which investors respond to A/B-share premiums and liquidity and lowers their performance. Our findings cannot be explained by government intervention, investor heterogeneity, foreign currency constraint, A/B-share liquidity or speculation differentials, or information advantage.
- DOI
- 10.1016/j.jbankfin.2019.02.002
- Volume
- 101
- Pages
- 59-76
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib