The Chinese Warrants Bubble: Evidence from Brokerage Account Records

Pearson, N.D.; Yang, Z.; Zhang, Q

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.

Citation

Pearson, N., Yang, Z., & Zhang, Q. (2020). The Chinese Warrants Bubble: Evidence from Brokerage Account Records. The Review of Financial Studies, 34(1), 264-312. https://doi.org/10.1093/rfs/hhaa037

• Journal Article Type: Article
• Acceptance Date: Jan 5, 2020
• Online Publication Date: Mar 25, 2020
• Publication Date: 2020
• Deposit Date: Jan 6, 2020
• Publicly Available Date: Mar 25, 2022
• Journal: Review of Financial Studies
• Print ISSN: 0893-9454
• Electronic ISSN: 1465-7368
• Publisher: Oxford University Press
• Peer Reviewed: Peer Reviewed
• Volume: 34
• Issue: 1
• Pages: 264-312
• DOI: https://doi.org/10.1093/rfs/hhaa037
• Public URL: https://durham-repository.worktribe.com/output/1311033