Time: 13:00-15:00 (UK Time), Wednesday, 22 March 2023
Presenter: Professor Eric Girardin, Aix-Marseille University
Chair: Professor Victor Murinde, SOAS University of London

Abstract
This presentation will have two parts. The first part will examine to what extent China’s stock market differs from the from the standard template of stock-market organization and functioning. In particular we will look at this market as combining all the ingredients of a highly speculative market. First, the market is dominated by inexperienced individual investors who have very few other investment opportunities, and who are less informed and more subject to behavioural biases, and sentiment driven, than institutional investors. Second, short-sales constraints are often binding, given the (initial) prohibition of short-selling. Third, the asset float was very small. We will empirically document how this inherently speculative character is reflected in recurrent bubbles in China’s stock market which we will precisely date with explosive- root detection techniques.             

The second part will determine what attracts new investors to China’s stock market. We will propose a theoretical model in which, on top of standard fundamentalist/chartist behaviour and social interactions, a neglected factor, funding liquidity requirements, drive brokerage-account opening. China’s exceptionally rapid growth episodes of brokerage accounts in the new millennium lead us to focus empirically both on new account opening and time-series analysis, rather than on surveys of existing accounts data. Our reduced-form model, estimated over a 15-year period, with monthly data, will show that in China new stock market participation is regime-dependent. Brokerage account-number growth is driven by social interactions both in the low- and high- account-growth regimes, but by chartist and fundamentalist, as well as funding liquidity variables, only in the rapid-growth regime; the dating of the latter regime matches the 2007 and 2015 Shanghai stock bubbles. ​

Presenter

Professor Eric Girardin studied both at Paris-Panthéon-Sorbonne and Cambridge Universities, and is currently affiliated with the School of Economics at Aix-Marseille University. He supervised a dozen Ph. D. students on China’s economy and financial system. He conducted research on China for the Asian Development Bank, the Asian Development Bank Institute, the Bank for International Settlements, the European Commission, and the OECD Development Centre. He held frequent visiting positions with the Bank of Finland Institute on Transition, Beijing-University-H.S.B.C. Business School (UK), the Chinese Academy of Social Sciences, Fudan University, the Hong Kong Institute for Monetary research and the Graduate School of the People's Bank of China.

He was member of the Advisory Council of the Asian Development Bank Institute and sits on the board of the China Economic Association (EU). He coordinated an EU-Marie Curie research contract on China’s Electricity Industry. His 80 publications include more than 20 journal articles on China’s stock, real estate and foreign exchange markets. He wrote a monograph on Banking Sector Reform and Credit Control in China, OECD, in 1997, and co-wrote with Zhenya Liu a book, Demystifying China’s Stock Market: The Hidden Logic Behind the Puzzles (Palgrave Macmillan, 2019).