The Threshold Effect of Leveraged Trading on the Stock Price Crash Risk: Evidence from China

The stock price crash constitutes one part of the complexity in the stock market. We aim to verify the threshold effect of leveraged trading on the stock price crash risk from the perspective of feedback trading. We empirically demonstrate that leveraged trading has a threshold effect on the stock p...

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Detalles Bibliográficos
Autores principales: Peng, Zhen, Hu, Changsheng
Formato: Online Artículo Texto
Lenguaje:English
Publicado: MDPI 2020
Materias:
Article
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7516721/
https://www.ncbi.nlm.nih.gov/pubmed/33286042
http://dx.doi.org/10.3390/e22030268
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author Peng, Zhen
Hu, Changsheng
author_facet Peng, Zhen
Hu, Changsheng
author_sort Peng, Zhen
collection PubMed
description The stock price crash constitutes one part of the complexity in the stock market. We aim to verify the threshold effect of leveraged trading on the stock price crash risk from the perspective of feedback trading. We empirically demonstrate that leveraged trading has a threshold effect on the stock price crash risk on the basis of monthly data on leveraged trading in the Chinese stock market from January 2014 to December 2016. At a low leverage ratio, leveraged trading reduces the stock price crash risk; however, as the leverage ratio increases and exceeds a certain threshold, leveraged trading asymmetrically increases the stock price crash risk. These findings provide new insights in understanding the complexity in the Chinese stock market.
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spelling pubmed-75167212020-11-09 The Threshold Effect of Leveraged Trading on the Stock Price Crash Risk: Evidence from China Peng, Zhen Hu, Changsheng Entropy (Basel) Article The stock price crash constitutes one part of the complexity in the stock market. We aim to verify the threshold effect of leveraged trading on the stock price crash risk from the perspective of feedback trading. We empirically demonstrate that leveraged trading has a threshold effect on the stock price crash risk on the basis of monthly data on leveraged trading in the Chinese stock market from January 2014 to December 2016. At a low leverage ratio, leveraged trading reduces the stock price crash risk; however, as the leverage ratio increases and exceeds a certain threshold, leveraged trading asymmetrically increases the stock price crash risk. These findings provide new insights in understanding the complexity in the Chinese stock market. MDPI 2020-02-26 /pmc/articles/PMC7516721/ /pubmed/33286042 http://dx.doi.org/10.3390/e22030268 Text en © 2020 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).
spellingShingle Article
Peng, Zhen
Hu, Changsheng
The Threshold Effect of Leveraged Trading on the Stock Price Crash Risk: Evidence from China
title The Threshold Effect of Leveraged Trading on the Stock Price Crash Risk: Evidence from China
title_full The Threshold Effect of Leveraged Trading on the Stock Price Crash Risk: Evidence from China
title_fullStr The Threshold Effect of Leveraged Trading on the Stock Price Crash Risk: Evidence from China
title_full_unstemmed The Threshold Effect of Leveraged Trading on the Stock Price Crash Risk: Evidence from China
title_short The Threshold Effect of Leveraged Trading on the Stock Price Crash Risk: Evidence from China
title_sort threshold effect of leveraged trading on the stock price crash risk: evidence from china
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7516721/
https://www.ncbi.nlm.nih.gov/pubmed/33286042
http://dx.doi.org/10.3390/e22030268
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