Research on the Pattern of Opening Low and Going High in Chinese Stock Market

This paper finds and confirms that there is a significant “opening low and going high” phenomenon in Chinese A-share market. This phenomenon is only prominent in Chinese stock market, and has a significant impact on the expected return of the stock. This paper provides an explanation for this phenomenon from the perspective of trading system and investor behavior. Based on the data of listed companies in Chinese A-share market from 2006 to 2019, by means of grouping test and Fama-Macbeth regression, this paper founds that:（1） “Open low and go high” is the most common price behavior in Chinese stock market, which is negatively correlated with the expected stocks’ return;（2） T+1 trading rule is the basis for the long-term existence of “opening low and going high”, and the negative impact of “opening low and going high” on the expected return can not be completely explained by the reversal effect;（3） “Open low and go high” is driven by the trading behavior of heterogeneous investors, and the role of investor sentiment is not obvious. This study expands the perspective of asset pricing research and provides suggestions for the improvement of trading rule in Chinese stock market.