Quantum theory provides a comprehensive framework for quantifying uncertainty, often applied in quantum finance to explore the stochastic nature of asset returns. This perspective likens returns to microscopic particle motion, governed by quantum probabilities akin to physical laws. However, such approaches presuppose specific microscopic quantum effects in return changes, a premise criticized for lack of guarantee. This paper diverges by asserting that quantum probability is a mathematical extension of classical probability to complex numbers. It isn’t exclusively tied to microscopic quantum phenomena, bypassing the need for quantum effects in returns.By directly linking quantum probability’s mathematical structure to traders’ decisions and market behaviors, it avoids assuming quantum effects for returns and invoking the wave function. The complex phase of quantum probability, capturing transitions between long and short decisions while considering information interaction among traders, offers an inherent advantage over classical probability in characterizing the multimodal distribution of asset returns.Utilizing Fourier decomposition, we derive a Schr¨odinger-like trading equation, where each term explicitly corresponds to implications of market trading. The equation indicates discrete energy levels in financial trading, with returns following a normal distribution at the lowest level. As the market transitions to higher trading levels, a phase shift occurs in the return distribution, leading to multimodality and fat tails. Empirical research on the Chinese stock market supports the existence of energy levels and multimodal distributions derived from this quantum probability asset returns model.

We study how bank liberalization affects analyst forecast accuracy using two interest rate deregulations in China—the removal of the cap on bank lending rates in 2004 and the removal of the floor in 2013—as quasi-natural experiments. Our results show that the analyst forecast accuracy for high-risk firms decreases significantly after the removal of the lending rate cap, whereas analyst forecast accuracy for low-risk firms increases significantly after the removal of the lending rate floor. Moreover, interest rate liberalization affects forecast accuracy through operational risk and information asymmetry channels. Furthermore, the impact was concentrated on firms whose actual performance fell short of performance expectations and those that received more bank loans. Our findings imply that interest rate liberalization policies may have unintended consequences for analyst forecasts.

The “Internet celebrity economy” is a business model aimed at capitalizing on online traffic based on the purchasing power of users on social media in which “influencers”—highly influential individuals—exercise their marketing power to create a fandom. China has witnessed an abrupt outbreak in its “Wanghong” (internet celebrity) economy since 2016, eventually leading to consecutive high closes for related stocks from around 2020. The empirical findings are as follows: First, investors’ attention to Wanghong stocks and cumulative abnormal returns (CARs) are significantly positively associated. However, operational results and CARs are weakly linked, implying that the economic impact of intense influencer marketing is short-lived, and abnormal returns constitute an anomaly. Second, the positive abnormal returns of Wanghong stocks last approximately six months, which overlaps with the boom period of the Wanghong index based on influencer news articles.

The study introduces 'earnings purity,' a concept based on the 'gold content' of target earnings, to evaluate its impact on merger and acquisition (M&A) premiums. Our findings reveal that targets with higher earnings purity command increased valuations and premiums. Further analysis of the information effects uncovers a U-shaped relationship between earnings purity and negotiation duration, suggesting that elevated premiums might not always be justified. The heterogeneity test indicates that the effect of a target firm's earnings purity on M&A premiums is more pronounced in cross-border and inter-industry M&As. However, it is less influential in cases with larger target firms and better external conditions. These results highlight the dual aspects of M&As, presenting them as both advantageous and potentially hazardous.

This paper provides new evidence on the predictive power of retail trading for future stock returns using tick data from the Chinese stock market. We explore sources of the predictive power from the novel perspective that sophisticated retail investors may exploit predictive information by observing limit order book and inferring institutional trading intentions. Employing a two-stage decomposition approach, we decompose the retail order imbalance into four components and find that the component related to retail investors’ perception of institutional trading intentions significantly contributes to the predictive power of the retail order imbalance for future returns, accounting for more than 15%.

This paper examines the relationship between population aging and corporate digital transformation from the perspective of demographic changes. Generally, the findings indicate that population aging notably contributes to corporate digital transformation, mainly through increasing labor costs, including expected and actual labor costs. Further analysis suggests that the above effects are significantly weakened in samples of firms with lower levels of regional intellectual property protection, higher corporate financial constraints, and shorter-sighted managerial decision-making. Moreover, the economic consequences test implies aforementioned favorable effects can enhance corporate total factor productivity.

We examine the performance of actively managed Chinese mutual Funds over the period 2002-2020. Using the bootstrap-based false discovery technique, we find that 19.25% of Chinese actively managed mutual funds produce positive-alpha, which contrasts with existing studies documented by others in developed markets. Our findings survive a battery of robustness tests. Unlike in developed markets, equilibrium accounting may not hold in China as the Chinese stock market is dominated by retail investors instead of mutual funds, and thus the mutual funds in China can be more skilled at the expense of the retail investors. We find supportive evidence of the applicability of the bootstrap-based false discovery rate method by conducting simulations.

Based on high-frequency data of China's commodity market from 2017 to 2022, this article examines the intraday momentum effect. The results indicate that China's commodity futures and options have significant intraday reversal effects, and the overnight opening factor and opening to last half hour factor are more significant. These effects are driven, in part, by liquidity factors. This trend aligns with market makers' behavior, passively accepting orders during low liquidity and actively closing positions amid high liquidity. Furthermore, our examination of cross-predictive ability shows strong futures-to-options predictability, while the reverse is weaker. We posit options traders' Vega hedging as a key factor in this phenomenon, our study finds futures volatility changes can predict options’ return.

This study examines the enduring effects of China’s planned economy on contemporary social attitudes. By leveraging spatial disparities in the historical distribution of state-owned enterprises and external shocks such as the First Five-Year Plan and the Third Front Construction movement, we find that a one percentage point increase in the historical SOE proportion of industrial output corresponds with a 0.57% to 0.89% increase in the contemporary preference for state-owned sectors. The results are robust after controlling the contemporary SOE employment share, and this effect does not apply to the younger generation born after the marketization reform. Furthermore, we provide evidence that city-level state ownership preferences significantly impact the likelihood of SOEs receiving subsidies, with this effect notably amplified in cities governed by locally-born leaders, but the share of locally-born leaders has been trending down.

The Chinese government has actively traded in the stock market through governmentsponsored institutions, the National Team, since the 2015 market crash. I adopt Koijen and Yogo’s (2019) demand system approach in China’s stock market to understand the impact of government participation. Estimation results indicate the government tilts towards large, less risky, and SOE stocks. During the crash, government participation indeed stabilized the market: the large-scale purchases reduced the cross-sectional market volatility of annual return by 1.8% and raised the market price by 11%. When the market ffuctuation returns to normal, the government acts more like an active investor; its price impact remains high but does not contribute to the cross-sectional volatility. Based on the theoretical framework of Brunnermeier et al. (2020), I investigate the interaction between the Nation Team and retail investors to reveal the government trading strategy. No evidence shows that government participation signiffcantly distorts market information efficiency.