Review of Financial Studies Vol. 34 No. 1 2021

The Chinese Warrants Bubble: Evidence from Brokerage Account Records

Neil D. Pearson¹; Zhishu Yang²; Qi Zhang³

¹ University of Illinois at Urbana-Champaign and CDI Research Fellow · ² Tsinghua University, School of Economics and Management · ³ Durham University Business School

Abstract

We use brokerage account records to study trading during the Chinese put warrants bubble and find evidence consistent with extrapolative theories of speculative asset price bubbles. We identify the event that started the bubble and show that investors engaged in a form of feedback trading based on their own past returns. The interaction of feedback trading with the precipitating event caused additional buying and price increases in a feedback loop, and estimates of the trading volume due to this mechanism explain prices and returns during the bubble.

DOI

10.1093/rfs/hhaa037

Volume

34

Issue

1

Pages

264-312

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

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