Herding in Chinese stock markets: Evidence from the dual-investor-group

Employing the group-specific herding measure, we explore the herding behavior in Chinese stock markets where a dual-group investor structure exists. Using high-frequency trading data, we find that the in-group herding tendency for most-informed investors and least-informed investors exhibits different patterns and has distinct effects on the market level herding as well as on subsequent market performances. Those effects are different in the “pre-peak” period and “post-peak” period from 7/2014 to 6/2016. Specifically, the evidence suggests that most-informed investors generally herd less than least-informed investors in the Chinese stock markets, but the gap narrows down when the market collapses and uncertainty increases. In addition, informed investors herd on fundamental factors and uninformed investors herd on non-fundamental factors only in the “post-peak” period.