TITLE:
Research on the Impact of Short Selling Mechanism on Investors’ Positive Feedback Trading Behavior
AUTHORS:
Yaoqiong Peng
KEYWORDS:
Short Selling Mechanism, Behavioral Finance, Positive Feedback Trading Behavior
JOURNAL NAME:
Modern Economy,
Vol.7 No.4,
April
28,
2016
ABSTRACT: With the background of
China’s Margin Trading pilot, the paper studies the effect of short selling
mechanism on investors’ positive feedback trading behavior. The research
results show that positive feedback trading behavior exists in Chinese stock
market, and the launching of the short selling mechanism inhibits effectively
the positive feedback trading behavior. Investors can show their pessimism
towards the stock price by going short selling, thus the stock price can return
quickly to the basic value. At the same time, leverage effect consists in the
stock market, namely that investors react more strongly to bad news than to
good news. After the implement of margin trading and short selling mechanism,
the risk hedging mechanism increases, and investors in the market generally
tend to react rationally to good news and bad news.