Post recommendation price drift: Evidence from Chinese stock market

This paper investigates price drifts and return reversals surrounding analysts’ initial stock recommendations in Chinese A-share market from 2010 to 2017. Using an integrated framework, we test the Information Dissemination Hypothesis (IDH), Price Pressure Hypothesis (PPH), and Attention-Grabbing Hypothesis (AGH). Our findings reveal that both positive and non-positive recommendations trigger significant short-term price drifts and trading volume spikes, followed by reversals. This pattern inconsistent with the IDH and supports a behavioral sequence in which attention-induced trading generates price pressure, while arbitrage frictions delaying the mispricing correction. In Chinese retail-dominated, arbitrage-constrained environment, limited attention drives short-term drifts, and arbitrage frictions prolong mispricing corrections. These insights extend the AGH to the Chinese setting and refine the understanding of post-recommendation price drift in emerging markets.