The "Large-volume Trading Anomaly" From The Perspective Of Investor Sentiment

Since the 21st century,many stock "anomalies" have appeared in stock market.In recent years,studies have found that there is a brand-new pricing anomaly in the A-share market: the "Large-Volume Trading Anomaly",That is,there is a positive correlation between the net purchase of large orders of stocks in the current month and the yield of the current month,and a negative correlation between the net purchase of large orders and the expected yield of the next month.Based on the existing literature,this paper studies the large-order transactions and stock returns in China’s A-share market from the perspective of investor sentiment,with the purpose of qualitatively studying the impact of investor sentiment on the "Large-Volume Trading Anomaly".Investor sentiment belongs to the category of behavioral finance,and taking it into account can help investors improve their understanding of the market,expand their investment ideas,and formulate corresponding investment strategies.At the same time,it is also conducive to the formulation of future policies and the development of A-share market.The existing literature on large-order transactions can be roughly divided into two categories.The first type of research explains the reasons for large-order transactions in the market.Empirical results show that under normal circumstances,large-order transactions contain information that affects asset price changes,and play a signal role in future stock price trends;The other type of empirical studies have confirmed that large orders can significantly affect the intraday price change or short-term price change.Behavioral finance integrates the theory of behavioral science into finance to explain and predict the phenomenon and development of the financial market from the aspects of micro-level individual behavior.Price signals such as large orders can easily trigger irrational behaviors such as herd behavior among retail investors and this influence may be transmitted from the current period to the future.Moreover,there is also a significant relationship between investor sentiment and investors’ herd trading behavior.This paper selects A-share stocks’ data from 2010 to 2022 as the research object,using univariate portfolio analysis,bivariate portfolio analysis,multi-factor regression analysis and Fama-Mac Beth regression.The univariate portfolio analysis and the bivariate portfolio analysis divided the total sample range into a high investor sentiment range and a low investor sentiment range for comparative analysis;multi-factor regression analysis used the risk-free rate of return to construct the excess return of the portfolio rate,and then carry out a regression test with Carhart’s four factors to see if the abnormal return is significantly different from 0,and further verify the influence of investor sentiment.The Fama-Mac Beth regression controls multiple variables,using OLS regression to study the relationship between the net purchase volume of large orders and the rate of return.Through empirical analysis,this paper draws the main conclusions as follows:First,in the China’s A-share market,there is a significant positive correlation between the net purchase volume of large orders and the return rate of the current month and a significant negative correlation between the net purchase volume of large orders and the return rate of the next month.Second,investor sentiment will have a significant moderating effect on the positive correlation between the net purchase of large orders and the current month’s stock return.Third,investor sentiment has a significant symmetrical impact on the negative correlation between the net purchase volume of large orders in the current month and the stock return in the next month.This paper has three innovations: First,in the previous research,the influence of investor sentiment was hardly taken into account.However,this paper uses the CICSI comprehensive index to verify the impact of investor sentiment on stock returns in large trades.Second,the data used in this paper is A-share data from2010 to 2022.The time span and number of observations are relatively large,and all eligible observations are about 300,000.Therefore,the randomness of the research results is also largely avoided.Third,this paper not only verifies the impact of investor sentiment on large orders in the A-share market through data analysis,but also theoretically analyzes the specific reality of the Chinese stock market and gives an explanation based on herd behavior.