LAUSR

ABSTRACT In this study, empirical evidence is presented to explain the momentum reversal phenomenon in the Chinese stock market in terms of the manipulation of institutional information. On the institutional “sell” side, we demonstrate that institutional traders send manipulated information to the market using a large volume of buy orders in order to boost the stock price and thus induce trading by retail investors. The reverse is also true on the institutional “buy” side. Thus instead of the traditional view of order flow information—“the more, the merrier”—the authors argue that “more is less” in the case of individual investors on the Chinese stock market. As a result, the empirical results presented in this study provide another feasible explanation for momentum reversal.