Asymmetric Synchronicity in Extreme Stock Price Movements: Evidence from China's Stock Market

We investigate the synchronicity of extreme stock returns by using the individual stock trading data from WIND database during a time span from May 1st 2014 to Dec 31th 2016 and find that there is an asymmetrical pattern of stock prices co-movement with respect to extreme market conditions, namely, the individual stock prices tend to fall down at the same time more than to rise up at the same time when the market experiences the extreme events. This is quite different from the fact that stock prices co-movements are almost symmetric under normal market conditions. We give an explanation with empirical evidence to this phenomenon that extreme positive and negative returns come mainly from different inherent mechanisms. Extreme positive returns happen mainly due to individual stock information release, while extreme negative returns mainly result from a market wide pessimistic investor sentiment. (C) 2017 The Authors. Published by Elsevier B.V.