Who trades during the extreme swings in Chinese stock market?

We investigate who are the investors that buy or sell on the days when the absolute value of market returns or the daily range of market index prices exceeds 5% in the Chinese stock market. Unlike Dennis and Strickland (2002) who find that institutional investors are buying (selling) more when there is a large market increase (decline) in U.S. markets, we find that institutional investors in China are systematically buying more than the less sophisticated individual investors during extreme market swings, particularly on extreme market-down days. Instead, we find strong evidence that institutional investors, primarily pension funds, provide a stabilizing influence during market downturn days. However, there is some evidence to suggest that institutional investors in aggregate do contribute towards pushing stock prices far beyond their fundamental values.