The conventional risk-based theory does not reconcile with the liquidity-beta anomaly in China: Low liquidity-beta stocks outperform high liquidity-beta stocks on a risk-adjusted basis. This striking pattern is robust to different weighting schemes, competing factor models, and other well-known return determinants in the cross section. We propose a competing behavioral-based explanation on the low liquidity beta anomaly in China. Consistent with our new perspective, liquidity beta is a negative return predictor in the cross section. Moreover, the time variation of the return differential between low and high liquidity beta stocks is led by investor sentiment after accounting for other possible economic mechanism.

Low liquidity beta anomaly in China / Frömmel, Michael; Han, Xing; Li, Youwei; Vigne, Samuel Alexandre. - In: EMERGING MARKETS REVIEW. - ISSN 1566-0141. - 50:(2022), pp. 1-17. [10.1016/j.ememar.2021.100832]

Low liquidity beta anomaly in China

Vigne, S. A.
2022

Abstract

The conventional risk-based theory does not reconcile with the liquidity-beta anomaly in China: Low liquidity-beta stocks outperform high liquidity-beta stocks on a risk-adjusted basis. This striking pattern is robust to different weighting schemes, competing factor models, and other well-known return determinants in the cross section. We propose a competing behavioral-based explanation on the low liquidity beta anomaly in China. Consistent with our new perspective, liquidity beta is a negative return predictor in the cross section. Moreover, the time variation of the return differential between low and high liquidity beta stocks is led by investor sentiment after accounting for other possible economic mechanism.
Liquidity, Liquidity beta, Sentiment, Asset pricing, China
Low liquidity beta anomaly in China / Frömmel, Michael; Han, Xing; Li, Youwei; Vigne, Samuel Alexandre. - In: EMERGING MARKETS REVIEW. - ISSN 1566-0141. - 50:(2022), pp. 1-17. [10.1016/j.ememar.2021.100832]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11385/222787
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