LAUSR

We investigate herding behavior using daily data of 87 Chinese stocks cross-listed on the A- and B-markets between 1996–2012, and shed light on herding within and between groups of investors with heterogeneous information. In addition to examining unconditional herding before and after the 2001-02 Chinese market liberalization, we explore different patterns of herd formation under different information environments. The results show that herding is present in both markets; however, while its intensity dropped significantly in the B-market after liberalization, it remains relatively unchanged in the A-market. Investors in the A-market exhibit intentional (non-fundamental) and unintentional (fundamental) herding over the entire period, while investors in the B-market exhibit intentional herding prior to market liberalization as well as both intentional and unintentional herding thereafter. Additionally, the results reveal possible interactions among and between arbitrageurs and noise traders in both markets.