Abstract
In this paper, we confirm the existence of the maximum daily return (MAX) effect in the Chinese stock market. Furthermore, we find that MAX is driven by large transactions whereby their increasing relative transaction volume triggers the MAX effect. This paper proposes the economic mechanism for the MAX effect as follows: institutional investor trading increases first, which causes individual investors to follow so that the total transaction volume increased, finally the MAX effect formatted. After the daily stock return reaches its monthly highest, the institutional trading quickly decays. By contrast, trading by retail investors decreases much slower after the MAX day.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
