Do Attention-Grabbing Stocks Attract All Investors? Evidence from China

Abstract:

Using a unique and comprehensive data set of China’s Shenzhen Stock Exchange, we test whether all investors adopt attention-grabbing stocks. Only the less-wealthy individuals, the Small Group, are found to have the tendency to pursue attention-grabbing stocks, such as abnormal-volume stocks, extreme-return stocks, and initial public offering stocks. By contrast, wealthy individuals, such as the Middle and Large Groups, are the sellers of attention-grabbing stocks and prefer non-attention-grabbing stocks, thereby exhibiting a behavior resembling that of institutional investors. The wealth levels of individual investors may account for such heterogeneous trading behavior. Heterogeneous trading behavior may address one reason why only the less-wealthy individuals do poorly in China’s stock market. Accordingly, we suggest that the Small Group manage the stock selection problem through consultancy with investment institutions.

Key Words::

• abnormal volume
• account information
• attention-grabbing stocks
• extreme returns
• heterogeneous trading behavior

Additional information

Notes on contributors

Zhuwei Li

Zhuwei Li ([email protected]; [email protected]), corresponding author, is a post-Ph.D. of financial engineering and behavioral finance in the Faculty of Management and Economics at Dalian University of Technology, Dalian, China. Yongdong Shi ([email protected]) is a professor of financial engineering and behavioral finance in the School of Finance at Dongbei University of Finance and Economics, Dalian, China. Wei Chen ([email protected]) is an analyst with the Shenzhen Stock Exchange, Shenzhen, China. Mohamed Kargbo ([email protected]) is a Ph.D. student of finance in the Faculty of Management and Economics at Dalian University of Technology, Dalian, China. The authors thank Brad Barber and Terrence Odean for many comments and discussions. The authors also thank Yuri Khoroshilov, Marek Jochec, Yangru Wu, Junmin Wan, Jianxin Chi, and participants at the 2010 Annual Meeting of the Academy of Behavioral Finance and Economics, and the 2013 Financial Risk and Corporate Finance International Seminar meetings for helpful suggestions. The authors appreciate the financial support of the Fundamental Research Funds for the Central Universities of China (Grant no. DUT13RC (3) 42), Postdoctoral Science Foundation of China (Grant no. 2013M541215), the National Natural Science Foundation of China (Grant nos. 71171036, 71072140), the major project of the National Social Science Foundation of China (Grant no. 12&ZD067), Distinguished Professor Support Plan of Liaoning Province (Grant no. [2013] 204), the Youth Foundation for Humanities and Social Sciences of the Ministry of Education of China (Grant no. 12YJC790091), the key project of the Humanity and Social Science Foundation of Education (Grant no. ZJ2013037).

Yongdong Shi

Zhuwei Li ([email protected]; [email protected]), corresponding author, is a post-Ph.D. of financial engineering and behavioral finance in the Faculty of Management and Economics at Dalian University of Technology, Dalian, China. Yongdong Shi ([email protected]) is a professor of financial engineering and behavioral finance in the School of Finance at Dongbei University of Finance and Economics, Dalian, China. Wei Chen ([email protected]) is an analyst with the Shenzhen Stock Exchange, Shenzhen, China. Mohamed Kargbo ([email protected]) is a Ph.D. student of finance in the Faculty of Management and Economics at Dalian University of Technology, Dalian, China. The authors thank Brad Barber and Terrence Odean for many comments and discussions. The authors also thank Yuri Khoroshilov, Marek Jochec, Yangru Wu, Junmin Wan, Jianxin Chi, and participants at the 2010 Annual Meeting of the Academy of Behavioral Finance and Economics, and the 2013 Financial Risk and Corporate Finance International Seminar meetings for helpful suggestions. The authors appreciate the financial support of the Fundamental Research Funds for the Central Universities of China (Grant no. DUT13RC (3) 42), Postdoctoral Science Foundation of China (Grant no. 2013M541215), the National Natural Science Foundation of China (Grant nos. 71171036, 71072140), the major project of the National Social Science Foundation of China (Grant no. 12&ZD067), Distinguished Professor Support Plan of Liaoning Province (Grant no. [2013] 204), the Youth Foundation for Humanities and Social Sciences of the Ministry of Education of China (Grant no. 12YJC790091), the key project of the Humanity and Social Science Foundation of Education (Grant no. ZJ2013037).

Wei Chen

Zhuwei Li ([email protected]; [email protected]), corresponding author, is a post-Ph.D. of financial engineering and behavioral finance in the Faculty of Management and Economics at Dalian University of Technology, Dalian, China. Yongdong Shi ([email protected]) is a professor of financial engineering and behavioral finance in the School of Finance at Dongbei University of Finance and Economics, Dalian, China. Wei Chen ([email protected]) is an analyst with the Shenzhen Stock Exchange, Shenzhen, China. Mohamed Kargbo ([email protected]) is a Ph.D. student of finance in the Faculty of Management and Economics at Dalian University of Technology, Dalian, China. The authors thank Brad Barber and Terrence Odean for many comments and discussions. The authors also thank Yuri Khoroshilov, Marek Jochec, Yangru Wu, Junmin Wan, Jianxin Chi, and participants at the 2010 Annual Meeting of the Academy of Behavioral Finance and Economics, and the 2013 Financial Risk and Corporate Finance International Seminar meetings for helpful suggestions. The authors appreciate the financial support of the Fundamental Research Funds for the Central Universities of China (Grant no. DUT13RC (3) 42), Postdoctoral Science Foundation of China (Grant no. 2013M541215), the National Natural Science Foundation of China (Grant nos. 71171036, 71072140), the major project of the National Social Science Foundation of China (Grant no. 12&ZD067), Distinguished Professor Support Plan of Liaoning Province (Grant no. [2013] 204), the Youth Foundation for Humanities and Social Sciences of the Ministry of Education of China (Grant no. 12YJC790091), the key project of the Humanity and Social Science Foundation of Education (Grant no. ZJ2013037).

Mohamed Kargbo

Zhuwei Li ([email protected]; [email protected]), corresponding author, is a post-Ph.D. of financial engineering and behavioral finance in the Faculty of Management and Economics at Dalian University of Technology, Dalian, China. Yongdong Shi ([email protected]) is a professor of financial engineering and behavioral finance in the School of Finance at Dongbei University of Finance and Economics, Dalian, China. Wei Chen ([email protected]) is an analyst with the Shenzhen Stock Exchange, Shenzhen, China. Mohamed Kargbo ([email protected]) is a Ph.D. student of finance in the Faculty of Management and Economics at Dalian University of Technology, Dalian, China. The authors thank Brad Barber and Terrence Odean for many comments and discussions. The authors also thank Yuri Khoroshilov, Marek Jochec, Yangru Wu, Junmin Wan, Jianxin Chi, and participants at the 2010 Annual Meeting of the Academy of Behavioral Finance and Economics, and the 2013 Financial Risk and Corporate Finance International Seminar meetings for helpful suggestions. The authors appreciate the financial support of the Fundamental Research Funds for the Central Universities of China (Grant no. DUT13RC (3) 42), Postdoctoral Science Foundation of China (Grant no. 2013M541215), the National Natural Science Foundation of China (Grant nos. 71171036, 71072140), the major project of the National Social Science Foundation of China (Grant no. 12&ZD067), Distinguished Professor Support Plan of Liaoning Province (Grant no. [2013] 204), the Youth Foundation for Humanities and Social Sciences of the Ministry of Education of China (Grant no. 12YJC790091), the key project of the Humanity and Social Science Foundation of Education (Grant no. ZJ2013037).