Empirical Test of the Positive Feedback Trading in the Stock Market of Our Country

Positive feedback trading is a kind of trading strategy by which investors decide their trading behavior in a certain period of time on the basis of the earnings in the former period of time. This kind of trading strategy exists widely in the stock market around the world and makes the stock market present an abnormal volatility. Using the indices in Shanghai Stock Market and Shenzhen Stock Market this paper makes an empirical study of the positive feedback trading in the stock markets of our country. The findings of the study show that the phenomenon of positive feedback trading exists apparently in Chinese stock markets and this phenomenon decreases the stability of stock markets.