Study On The Phenomenon Of "High-Turns" In China's Stock Market

In recent years, the phenomenon has been existing in China's stock market that stock prices usually rise after the related companies release high-turns plans. However, the high-turns dividend policy does not have any substantial impact on the profitability of listed companies. As a result, it should not affect the value of these companies. Then why Chinese investors still like stocks with the theme of high-turns? This question deserves our research and discussion.This article selects companies which released high-turns plans between 2005 and 2015 as samples and examines the effect of high-turns plans on related stocks respectively in short term and long term under the method of event study. The research results show that, the release of high-turns plans has a significantly positive effect on the related stock prices in the short term. In the long term, the release of high-turns plans has a significantly negative effect on the related stock prices. According to the behavioral finance theory, the causes of this phenomenon are price illusion and herd effect of stock investors. These factors lead to the significantly positive abnormal return of related stocks in the short term and the significantly negative abnormal return of related stocks in the long term. This result reflects that irrational behavior does exist in China's stock market. Finally, we derive some enlightenment according to the result.