Impact of Investor Behavior and Stock Market Liquidity: Evidence from China

Abstract

Investor behavior is one of the important factors that affects market liquidity. It is very interesting to find out how investor behavior affects stock market liquidity. The Investor sentiment changes and information cognitive ability affect not only their expected returns but also market liquidity through short-selling restrained market behavior. This paper gives a comprehensive index of investor sentiment based on the entropy method. According to the empirical analysis based on evidence from China, we obtain the following results: The investor sentiment has a positive impact on market liquidity; the development of margin trading has curbed the positive impact of investor sentiment on market liquidity; the information cognitive ability has a negative impact on market liquidity; the explosive information volume enhances the market liquidity in the bull, weakens the market liquidity in the bear, and has no significant impact while shocked.

The effect of unregistered assets and information transparency on the firm's performance and stock liquidity in the listed firms in Tehran Stock Exchange

“…Chan et al (2008) showed that irms with higher R&D or higher capital costs can increase their information disclosure by reducing information asymmetry and increasing the irm's performance. However, this result is relatively in agreement with the indings of Hu et al (2019), Nezam et al (2016), and Mangena and Tauringana (2007). Hu et al (2019) showed that there is no signi icant relationship between the criterion of transparency and the expected return of shareholders.…”

“…However, this result is relatively in agreement with the indings of Hu et al (2019), Nezam et al (2016), and Mangena and Tauringana (2007). Hu et al (2019) showed that there is no signi icant relationship between the criterion of transparency and the expected return of shareholders. Mousavi SHiri, Roshandel, and KHalatbari (2018) in their research under the title of "The role of information transparency in explaining the relationship between government political support and the performance of the listed irms in the Tehran Stock Exchange" concluded that there is no signi icant relationship between information transparency and return on assets.…”

“…The result of the fourth hypothesis showed that information transparency can increase liquidity. This result is in agreement with the indings of Chan et al (2008), Florio and Leoni (2017), Hu et al (2019), Mangena and Tauringana (2007), and in disagreement with the indings of Nezam et al (2016). Chan et al (2008), Florio and Leoni (2017), Hu et al (2019) showed that there is a positive and signi icant relationship between information transparency and stock liquidity.…”

“…However, no signi icant relationship was found between the criteria of information quality and market risk. Hu, Zhong, and Cai (2019) investigated information transparency and stock liquidity. The results of their research showed a positive and signi icant relationship between information transparency and stock liquidity.…”

Do Liquidity Proxies Based on Daily Prices and Quotes Really Measure Liquidity?

“…It specifies the “amount of information” that is shared by two variables and is expressed in terms of the joint probability distribution. The concept comes from the Information Theory and is closely related to that of entropy [ 58 , 59 , 60 ]. The entropy of random variable X , , is expressed in the following way: where is a probability mass function, while L is the length of the time series.…”