Previous studies show that individual investors play a dominant role in China's stock market. Their behavior of chasing-rise being stronger than killing-fall leads to asymmetry of feedback trading. Our article investigates how mutual funds react to this market force. Using China's stock and fund...

Using the gradual lifting of the short-sale ban in the Chinese stock market from 2010 to 2019 as natural experiments, the paper studies mutual funds’ strategies towards short-sales. The difference-in-difference regressions consistently show that mutual funds hold fewer shares when stocks are...