Small Individual Investor Trading Patterns Around Rumors

Rumors as a special kind of information in the stock market will also cause the stock price to fluctuate.A large number of research documents show that rumors will affect the behavior of investors and have an impact on the market.Good rumors will bring news to the stock price.but bad rumors,can cause negative fluctuations in the stock.The volatility of stock prices is the ultimate result of investors' behavior after receiving rumors.The rise and fall of stock prices are the result of investors chasing or selling stocks.Each investor's investment behavior is based on the investor's own judgments and sentiment,which naturally leads investors to predict the profitability of stock prices.Some investors have private information and outstanding investment skills.,making it able to obtain excess returns,and some investors do not have private information or extraordinary investment skills,resulting in its repeated defeat in the market.This article uses the high-frequency data of individual investor trading transactions in the Shanghai and Shenzhen markets to research the behavior and the predict ability of stock price of small-sized investors(under 10,000 yuan per transaction).through empirical research,first of all,the article finds that the rumors do have a stimulating effect on the market.Secondly,to study the behavior of small investors during rumor,this article will observe the behavior of small investors according to good news and bad news,and find that small investors are positive to the bad news around the rumor days.There was a significant purchase,but more buying of bad news stocks was made before the rumor days,and in the rumored days,the situation was exactly the opposite,buying more of the good news stocks.This article first explains the disposition effect of behavioral finance,that is,microinvestors are facing stocks that have fallen in value.Secondly,this paper explains the micro-investors' investment strategy from the point of view of small investors.Contrary to expectations,the stocks that have risen before the rumor have declined in the rumor,and the stocks that fell before the ruling days have risen.The strategy of small investors has also made their actions appear to be contrary to the behavior of the market as a whole.Finally,we study the profitability of small investors.It was found that on the day of rumor clarified day,small investors' profit power was poor.Four weeks later,its forecasting ability gradually became better but not obvious.The regression results are consistent with the findings of the grouping.On the rumor clarified day,the most profitable of the stock price is rumor and the stock price.While the most insignificant and unprofitable one is the behavior of small investors.Four weeks later,the most profitable variable is the stock price,rumors and small investors' behavior are not profitable.Compared with the rumor clarified day,its earning ability became better,but not significant in group observations and regressions.At the end of this paper,three reasons are discussed:(1)The amount of sample data is too small.(2)The rise and fall of all stocks are not significant four weeks after the rumor clarified day.(3)Most small investors do not have prediction rumor.Private information on stock prices and rational investment techniques after the day.