| Over the past 30 years,the Chinese A-share market has undergone a transformation from nothing to something.It is growing up from weak to strong.The report of the 19 th National Congress of the Communist Party of China clearly stated that “increasing the proportion of direct financing and promoting the healthy development of multi-level capital markets”.The Central Economic Work Conference held from December 16 to 18,2020,once again set the tone for the construction of the capital market,calling for "promoting the healthy development of the capital market." The statements on the capital market in the two major conferences all mentioned "healthy development",reflecting that our country's capital market construction has reached a stage where it is urgent to pay attention to quality improvement.At the same time,the domestic economic development is undergoing a transition from rapid growth to highquality development.It is in a critical period of structural optimization,transformation and upgrading.The allocation of resources through direct financing of the capital market is conducive to promoting economic transformation and upgrading and achieving high-quality development.In addition,with the accelerated opening up of the domestic capital market,Ashares have been incorporated into the three major international index systems of MSCI(Morgan Stanley Capital International),FTSE Russell and S&P Dow Jones.The international status of the Chinese capital market has improved significantly.It can be seen that the importance of domestic capital market is increasing day by day,whether from the perspective of macro environment,policy guidance or external influence.Due to the late establishment,however,the Chinese A-share market is still immature compared to that of developed countries such as the United States.This immaturity is mainly reflected in the investor structure,where the proportion of individual investors is extremely high in the Chinese A-share market,which is clearly different from the U.S.stock market dominated by institutional investors.Individual investors are generally keen on speculation,follow the gossip to trade,and have overreactions.Meanwhile,they tend to ignore the fundamental changes of listed companies,have obvious disadvantages in information processing,and also appear underreaction situations.Whether overreaction or underreaction,it will cause the stock price deviating from its intrinsic value.Correspondingly,the overall effectiveness of the Chinese A-share market is still not strong,and various market anomalies frequently appear.It is necessary to conduct in-depth research on the market anomaly.The research on "tug of war" is relatively extensive in the U.S.stock market.Early studies were mainly based on the decomposition framework of overnight returns and daytime returns,as well as short-term stock price fluctuations(e.g.intraday return reversals).In recent studies,with the deepening of research,it has been found that such tug of war can predict the future stock returns at the cross-sectional level,called the anomaly of "positive overnight returns followed by negative daytime reversals"(or "negative overnight returns followed by positive daytime reversals").The so-called "positive overnight returns followed by negative daytime reversals" and "negative overnight returns followed by positive daytime reversals" are two forms of intraday return reversal.The former means that the stock's opening price on the certain day is higher than its closing price of the previous trading day(i.e.the overnight return is positive)and the stock's closing price of that very day is lower than its opening price(the daytime return is negative).The latter means that the stock's opening price on the certain day is lower than its closing price of the previous trading day(i.e.the overnight return is negative)and the stock's closing price of that very day is higher than its opening price(the daytime return is positive).It should be noted that both "positive overnight returns followed by negative daytime reversals" and "negative overnight returns followed by positive daytime reversals" are normal stock price movements and do not constitute anomalies.The very anomaly in this thesis refers to the situation that if the phenomenon of positive overnight returns followed by negative daytime reversals occurs at abnormal frequency,it represents the extremely tug of war between heterogeneous investors behind it.This tug of war has significant positive prediction ability on the cross section of the stock returns.This cross-sectional pricing effect is called the anomaly of "positive overnight returns followed by negative daytime reversals".However,research on this anomaly in the Chinese A-share market is very rare.There are significant differences between the Chinese A-share market and U.S.stock market.Whether A-share market has such anomaly has become a direction worthy of discussion,which is also the core issue of this thesis.Based on the assumption of investor heterogeneity,different types of investors have significant differences in their investment behaviors and the impacts on asset prices.The difference is likely to cause frequent occurrences of tug of war between these two parties in the market.The Chinese A-share market has been dominated by individual investors since establishment.Tug of war between heterogeneous investors is more likely to happen.Individual investors generally have behavioral bias.They are representatives of irrational investors and are more likely to cause mispricing.This logic builds an effective nexus between tug of war and mispricing,and the resulting prediction of future stock returns.Upon the above background,this study mainly focuses on the following three issues:(1)Does the Chinese A-share market have the anomaly of "positive overnight returns followed by negative daytime reversals" ? There is a strong nexus between this anomaly and the effect of "positive overnight returns followed by negative daytime reversals",which is one of the effects of intraday return reversal.Thus,the anomaly is premised on the intraday return reversal.If the empirical results cannot provide evidence of intraday return reversals,in-depth research on the anomaly will become meaningless.Whether there is an intraday returns reversal effect in the Chinese A-share market has become the first issue to be test.Furthermore,if the phenomenon of "positive overnight returns followed by negative daytime reversals" occurs at abnormal frequency,will this effect have the ability to predict future stock returns on the cross-section?That is,whether there is the above anomaly caused by the tug of war between heterogeneous investors in the Chinese A-share market,which is similar to the U.S.stock market? This is the most important and core question that this thesis will answer.(2)Akbas et al.(2020)attributed the anomaly of "positive overnight returns followed by negative daytime reversals" in the U.S.stock market to the noise trader risk.The trading mechanism and investor structure of the Chinese A-share market are different from those of mature markets in developed countries.Therefore,does this anomaly in Chinese A-share market also stem from the assumption of the certain risk? Or is it caused by mispricing?(3)After clarifying that the anomaly of "positive overnight returns followed by negative daytime reversals" originates from mispricing,the influence of information on this anomaly becomes even more important.The final question to be answered is whether positive or negative information has an asymmetric effect on the above anomaly.There are six chapters in this thesis,and the main contents are arranged as follows: Chapter1,introduction.This chapter mainly elaborates the research background,research purpose and the significance of this thesis.It summarizes the research content,combs the research ideas,describes the research methods,and refines the innovation and shortcomings.Chapter 2,literature review and theoretical foundation.This chapter first sorts out the foreign and domestic literature.It summarizes the conclusions of existing research on tug of war and intraday return reversal,the impact of information on the market,the effect of earnings announcements and investor sentiments.Then dissertate on four issues: the first is the efficient market hypothesis and theories related to market anomaly.The second is to sort out the behavioral finance theory models underlying market anomalies,including DSSW model and DHS model,which are more relevant to this thesis.The third is about the study's methodological basis.The fourth is to analyze the theoretical mechanism of the anomaly of "positive overnight returns followed by negative daytime reversals" that this thesis focuses on.Chapter 3,the existence test of the anomaly of "positive overnight returns followed by negative daytime reversals" in the Chinese A-share market.This chapter first tests the reversal effect of intraday returns in the Chinese Ashare market and confirms that the premise of the anomaly of "positive overnight returns followed by negative daytime reversals" holds.This part first confirms the existence of intraday reversal effect at individual stock level.Then,it further tests the robustness of the effect.Finally,it investigates the impact on intraday reversal effect from several factors of mispricing.Next,this chapter uses the A-share stocks trading data to construct a variable that measures the abnormal frequency of positive overnight returns followed by negative daytime reversals at individual stock level.Using paradigm methods,this part empirically tests the existence and robustness of the anomaly of "positive overnight returns followed by negative daytime reversals".Chapter 4,the source of the anomaly of "positive overnight returns followed by negative daytime reversals" in the Chinese A-share market.After confirming that the above anomaly does not comply with the explanation of risk compensation,this chapter inspects whether the irrational mispricing caused by underreaction can help explain the source of the anomaly.Chapter 5 is about the asymmetry impact of good or bad news on the anomaly of "positive overnight returns followed by negative daytime reversals".This chapter first constructs a proxy for good or bad news.After confirming the reasonableness of this new indicator,this part tests its asymmetric influence on the anomaly of "positive overnight returns followed by negative daytime reversals" through grouped regression.Also,it explores the role of sentiments in the asymmetry impact mechanism.Chapter 6,conclusions and prospects.This part summarizes the main work and conclusions of the full thesis,and then proposes the corresponding recommendations.Last but not the least,it looks forward to the future research directions in this field.The innovative contribution of this thesis are as follows:(1)The study finds out a new anomaly in the Chinese A-share market,named "positive overnight returns followed by negative daytime reversals".First,this thesis confirms the significant existence of this anomaly from multiple angles,which provides a useful supplement to the research framework of overnight and daytime returns.Also,it provides empirical evidence of asset pricing in emerging markets from a realistic perspective.Second,there are few studies on heterogeneous investors in the Chinese A-share market from the perspective of "tug of war".The thesis is also a powerful supplement to the domestic research on heterogeneous investors.Third,the research on the Chinese A-share market found that the predictive effectiveness of tug of war is asymmetric,and the anomaly of "positive overnight returns followed by negative daytime reversals" is weaker than that of the U.S.stock market(Akbas et al.,2020).The above differences are related to the discrepancies in market transaction mechanisms and investor structures between the two markets.(2)Different from the U.S.market,whose kind of anomaly mainly derived from risk compensation,the thesis verifies that the source of the anomaly of Chinese A-share market originates from mispricing,enriching the mechanism explanation of tug of war.It finds that the mechanism of tug of war is driven by investors' irrational mispricing.It not only shows that the domestic capital market started late and there exist pricing distortions caused by investors' irrationality,but also provides support for investment strategies and related policy recommendations.Furthermore,it has reference significance for other emerging markets where individual investors relatively dominate.(3)On the basis of the first discovery of the anomaly,it is further discovered that good or bad news has an asymmetrical impact on the anomaly.First,it introduces the impact mechanism of information on the stock market into the anomaly of "positive overnight returns followed by negative daytime reversals",and explores the asymmetric impacts of good or bad news on the anomaly.Second,it brings earnings information,market sentiment,and market anomalies together into a unified perspective,which enriches the research framework of earnings information and market sentiment on the stock market.Third,the thesis constructs a profitability shock indicator by a cross-sectional model,acting as a new proxy for the listed companies' fundamental information in the Chinese A-share market.The main conclusions of this study are as follows:First,there exists a significant reversal effect of intraday returns.The abnormal frequency of this effect has an asymmetric stock returns prediction ability.That is,there exist a significant anomaly of "positive overnight returns followed by negative daytime reversals",but there is no anomaly of "negative overnight returns followed by positive daytime reversals".Specifically,to the effect of intraday return reversal,a long-short strategy constructed by sorting and grouping of the overnight returns can achieve an excess return of 1.1% during the daytime in an ideal state.This intraday reversal effect is robust,not depending on the bullish and bearish market status and the calendar effect.Related factors may have a certain impact on its significance,but it will not destroy the robustness of the reversal effect.Relatively speaking,stocks with small market capitalization,high retail investors attention,and strong arbitrage restrictions have more significant intraday return reversal effect.On the cross-sectional pricing effectiveness of the abnormal frequency of positive overnight returns followed by negative daytime reversals,the long-short strategy based on Ab?neg can earn an average annual excess return rate of 3.66%(adjusted by three-factor risk).The continuous tests results show that the anomaly lasts for up to 6 months.After controlling the main firm characteristics,the anomaly exists robustly.This anomaly is particularly significant in the small market capitalization and high-growth "glamour" stocks,which are usually more attractive to individual investors.The Fama-Mac Beth regression results further verify the existence of the anomaly of "positive overnight returns followed by negative daytime reversals" and the non-existence of anomaly of "negative overnight returns followed by positive daytime reversals".Controlling non-tradable shares reform,the monthly reversal effect and using the three-factor and five-factor riskadjusted return rate to replace the original return rate,the core variable Ab?neg still has a significant positive predictive effectiveness on future stock returns.Second,unlike the U.S.stock market,the source of the anomaly in the Chinese A-share market is mispricing.Clarifying that the source does not derive from risk compensation,it is found that stocks under low institutional holdings,high market sentiment and high realized volatility are more prone to the anomaly,which confirms the judgment of mispricing.Continuous tests show that the specific source is underreaction.Furthermore,factors such as gambling preferences and arbitrage restrictions can help explain the source.Third,good or bad news have asymmetrical effect on the anomaly,and sentiment exerts supplementary impact in this asymmetrical effect.Specifically,good news strengthens the anomaly while bad news weakens it.Neither good nor bad information can make the anomaly of "negative overnight returns followed by positive daytime reversals" significant.Sentiment does not fundamentally change this asymmetrical impact mechanism,but can exert additional impact on its basis.High sentiment will further strengthen the positive impact of good news on the anomaly of "positive overnight returns followed by negative daytime reversals",and low sentiment will weaken this positive impact.Correspondingly,bad news performs the opposite.The thesis explores whether monthly intensity of the daily tug of war between individual investors and institutional investors can predict future stock returns at cross-sectional level,based on the assumption of investor heterogeneity.It enriches the mechanism explanation of tug of war,further improves the related theories on the cause of anomalies,and provides supplements to the study of overnight and daytime returns,anomalies in the Chinese A-share market,domestic research on heterogeneous investors,and the framework of earnings information and sentiment.Relevant conclusions also have important practical significance for improving rational investment ideas,optimizing market efficiency,and enhancing regulatory effectiveness. |
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