Capital Market Liberalization and Knight Uncertainty——An Empirical Analysis Based on the Trading Behavior of Northbound Fund
Foreign investors are playing an increasingly important role in China's capital market,and the flow of northbound fund has always been the market indicator that investors focus on.This paper measures the trading behavior of northbound fund based on the data of northbound fund holdings,calculates the Knight uncertainty of stocks based on intraday high-frequency price data,and explores the impact of trading behavior of northbound fund on Knight uncertainty.The empirical results show that the higher the shareholding ratio of northbound funds,the lower the Knight uncer-tainty.The greater the change in shareholding ratio of northbound funds,the higher the Knight uncertainty.Further research shows that the mechanisms of northbound funds'reduction in Knight uncertainty include restraining the impact of noise trading,improving the speed of information integration,and enhancing investors'confidence.The research conclusion supports northbound fund holdings is conducive to reducing the Knight uncertainty of stocks,and plays a positive role in maintaining market stability,but the large inflow and outflow of northbound fund will also increase the risk of stock price uncertainty.
Capital market liberalizationnorthbound fundtrading behaviorKnight uncertainty
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