Lectureon "Trading Restriction as a Channel of Financial Contagion-Evidence from China's Stock Market"
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Lectureon "Trading Restriction as a Channel of Financial Contagion-Evidence from China's Stock Market"
DateandTime: 2017-06-13 8:04:57

Speaker: Laura Xiaolei Liu, Professor, Finance at Guanghua School of Management, Peking University

Date: June 13, 2017

Time: 2:30 pm

Location: 513 Lecture Hall, Shaw Science Hall, Central Campus 

Sponsor: the Center for Economic Research Shandong University


Abstract:

During June 15 to July 10, 2015, the Chinese stock market fell by over 32 percent, wiping out over US$3.5 trillion in three weeks. This paper examines the role played by trading restrictions, including price limits and trading suspension in crisis contagion during the crash. Because of these restrictions, the trading of many over-valued bubble stocks was stopped. Examining data on mutual funds' stock portfolios and stock trading, we document that as funds faced huge redemption pressure, they were forced to sell tradable stocks that were fairly valued. Furthermore, funds with negative flows sold more than others, and they liquidated more stocks on the main board. Using the stock-fund combined data, we also show that a tradable stock was more likely to be sold if its major holders were exposed to a larger proportion of non-trading stocks in their portfolio. Moreover, for these stocks, both returns and trading volumes decline significantly, activity which could be driven by a consensus on the stocks being heavily sold.


Bio:

Laura Xiaolei Liu is Professor of Finance at Guanghua School of Management, Peking University. Her PhD thesis was awarded the Best Corporate Finance Paper Award at Western Finance Association conference and the Best PhD Paper Award at Southwestern Finance Association conference. Her research interest is capital markets and empirical corporate finance. Her work has been published in leading academic journals including Journal of Finance, Review of Financial Studies and Journal of Corporate Finance. 


For more information, please visit:

http://www.cer.sdu.edu.cn/info/1059/6043.htm 


Edited by: Zhang Xinyuan




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