PDF(139 KB)
Research on Investment Preference and the MAX Effect in Chinese Stock Market
Xiaoju GOU, Limei BIE
Journal of Systems Science and Information ›› 2016, Vol. 4 ›› Issue (6) : 519-533.
PDF(139 KB)
PDF(139 KB)
Research on Investment Preference and the MAX Effect in Chinese Stock Market
Investors prefer to invest the stocks with high history returns, which results in that the return of the stock with high history maximum return is often lower than that with low history maximum return, i.e., the MAX effect. We show that the MAX effect is also significant in China stock market, that is, there is a significant negative relationship between maximum return and expected return. We then conduct portfolio analysis and Fama-Macbeth cross-sectional regression and find that range of price and turnover rate can explain the MAX effect in a certain extent, idiosyncratic volatility and idiosyncratic skewness cannot explain the negative relationship between maximum return and expected return. Moreover, maximum return explains the idiosyncratic volatility puzzle partially.
MAX effect / idiosyncratic volatility / idiosyncratic skewness / range of price {{custom_keyword}} /
[1] Kumar A. Who gambles in the stock market?. The Journal of Finance, 2009, 64(4):1889-1933.
[2] Statman M. Lottery players/stock traders. Financial Analysts Journal, 2002, 58(1):14-21.
[3] Bali T G, Cakici N, Whitelaw R F. Maxing out:Stocks as lotteries and the cross-section of expected returns. Journal of Financial Economics, 2011, 99(2):427-446.
[4] Fong W M, Toh B. Investor sentiment and the MAX effect. Journal of Banking and Finance, 2014, 46:190-201.
[5] Brunnermeier M K, Gollier C, Parker J A. Optimal beliefs, asset prices, and the preference for skewed returns. National Bureau of Economic Research, 2007, 97:159-165.
[6] Barberis N, Huang M. Stocks as lotteries:The implications of probability weighting for security prices. National Bureau of Economic Research, 2008, 98:2066-2100.
[7] Mitton T, Vorkink K. Equilibrium underdiversification and the preference for skewness. Review of Financial Studies, 2007, 20(4):1255-1288.
[8] Zheng Z Z, Wang L, Wang L Z. Are idiosyncratic skewness priced?. Journal of Management Sciences in China, 2013, 16(5):1-12.
[9] Ang A, Hodrick R J, Xing Y, Zhang X. High idiosyncratic volatility and low returns:International and further US evidence. Journal of Financial Economics, 2009, 91(1):1-23.
[10] Ang A, Hodrick R J, Xing Y, Zhang X. The cross-section of volatility and expected returns. The Journal of Finance, 2006, 61(1):259-299.
[11] Liu W Q, Xing H W, Zhang X D. Investment preference and the idiosyncratic volatility puzzle. Chinese Journal of Management Science, 2014, 22(8):10-20.
[12] Harvey C R, Siddique A. Conditional skewness in asset pricing tests. The Journal of Finance, 2000, 55(3):1263-1295.
[13] Amihud Y. Illiquidity and stock returns:Cross-section and time-series effects. Journal of Financial Markets, 2002, 5(1):31-56.
[14] Jegadeesh N, Titman S. Returns to buying winners and selling losers:Implications for stock market efficiency. The Journal of Finance, 1993, 48(1):65-91.
[15] Jegadeesh N. Evidence of predictable behavior of security returns. The Journal of Finance, 1990, 45(3):881-898.
[16] Zheng Z Z, Sun Q Q. Lottery-like stock trading behavior analysis:Evidence from Chinese A-share stock market. Economic Research Journal, 2013, 5:128-140.
[17] Merton R C. A simple model of capital market equilibrium with incomplete information. The Journal of Finance, 1987, 42(3):483-510.
[18] Zuo H M, Zheng M, Zhang Y. The idiosyncratic volatility and cross-sectional return:The explanation of idiosyncratic volatility puzzle in Chinese stock market. The Journal of World Economy, 2011, 5:117-135.
[19] Deng X C, Zheng Z Z. Does there exist idiosyncratic volatility puzzle in Chinese stock market?. Journal of Business Economics, 2011, 1(1):60-67.
[20] Huang B, Li Z, Gu M D. A study of idiosyncratic risk based on risk-preferred capital asset pricing model. Management World, 2007(11):119-127.
[21] Xu X J. Idiosyncratic risk and stock returns:A study of speculation behavior in China stock market. Economic Management Journal, 2010, 12:127-136.
[22] Yang H W, Han L Y. An empirical study of the relationship between the idiosyncratic volatility and crosssectional return. Journal of Beijing University of Aeronautics and Astronautics (Social Sciences Edition), 2009, 22(1):6-10.
PDF(139 KB)
/
| 〈 |
|
〉 |
