Investor herding behaviour of Chinese stock market

•Chinese investors exhibit different level of herding behaviour, in particular, herding strongly exists in the B-share markets.•We also find that across markets herding behaviour is more prevalent at industry-level.•Herding behaviours are stronger for the largest and smallest stocks, and are stronger for growth stocks relative to value stocks.•Herding behaviour is also more pronounced under conditions of declining markets.•Over the sample period we are examining, herding behaviour diminishes over time.

This paper examines the existence and prevalence of investor herding behaviour in a segmented market setting, the Chinese A and B stock markets. It is the first study to detail the difference in herding behaviour across A and B markets. The results indicate that investors exhibit different levels of herding behaviour, in particular, herding strongly exists in the B-share markets. We also find that across markets herding behaviour is more prevalent at industry-level, is stronger for the largest and smallest stocks, and is stronger for growth stocks relative to value stocks. Herding behaviour is also more pronounced under conditions of declining markets. Over the sample period we are examining, herding behaviour diminishes over time. The results provide some indication to the effectiveness of regulatory reforms in China aimed at improving information efficiency and market integration.