Unlocking the Reversal Anomaly in the A-share Market: Insights from Marginal Funds of Institutional Investors
DOI:
https://doi.org/10.54097/j19fmj53Keywords:
Efficient Market Hypothesis, reversal effect, institutional investors, A-share market.Abstract
Fama's Efficient Market Hypothesis (1970) posits that all valuable information is swiftly reflected in stock prices in mature markets. However, anomalies like momentum and reversal effects persist in China's A-share market. This study investigated the short-term reversal effect using turnover rates and institutional investor marginal funds. Significant reversals were found in high-turnover stocks due to speculative trading and deviations from intrinsic value. Institutional investors played a crucial role in correcting mispricing. The Institutional Holding Change Ratio (IHCR) demonstrated that institutional investors' marginal funds strongly explain the reversal anomaly and act as a style factor with positive returns. This research highlights the impact of institutional and individual investor behaviors on market efficiency and investment strategies.
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