But how can you explain the persistent bear market in China? The researchers think that three factors have worked to weaken the impact of gambler’s fallacy. First, this study is aimed at individual investors, not those institutional ones who tend to be more rational. Secondly, the participants in the study are better educated than others in the market, and those under-educated investors tend to make a lot of “irrational noise,” which then undermines the impact of gambler’s fallacy. Finally, the study doesn’t take into account external factors such as false market information, the low quality of listed companies and the changes in public policies.

“Our research is only aimed to analyzing how individual investors act at a time of prolonged market appreciation or downfall,” the researchers conclude. “As to how their behavior will impact market demand, external factors have to be taken into consideration.”