Media sentiment and cross-sectional stock returns in the Chinese stock market

2021 ◽  
pp. 101590
Author(s):  
Hanyu Du ◽  
Jing Hao ◽  
Feng He ◽  
Wenze Xi
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Chinese Stock Market ◽  
Cross Sectional ◽  
Media Sentiment

Investor recognition and stock returns: evidence from China

2018 ◽  
Vol 8 (2) ◽  
pp. 199-215 ◽  
Author(s):  
Hongquan Zhu ◽  
Lingling Jiang
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Capital Market ◽  
Univariate Analysis ◽  
Chinese Stock Market ◽  
Cross Sectional ◽  
Content Type ◽  
Listed Firms ◽  
Monthly Return ◽  
The Relationship

Purpose Merton’s model of capital market equilibrium under incomplete information predicts that contemporaneous stock returns are positively related to investor recognition and that future stock returns are negatively related to investor recognition. The purpose of this paper is to empirically investigate whether Merton’s theory holds true for the Chinese stock market. Design/methodology/approach This paper proposes the degree of shareholder base growth (SBG) as a proxy for investor recognition and examines the relationship between investor recognition and stock returns through a univariate analysis and Fama-Macbeth cross-sectional regressions based on A-Share listed firms. Findings The results show that investor recognition is nonlinearly and positively related to contemporaneous stock returns and is negatively related to future stock returns in contrast to the conclusions of Merton’s theory. A long-short trading strategy that involves buying stocks with the lowest SBG rate and that sells stocks with the highest SBG rate will earn an average monthly return of 3.615 percent. Research limitations/implications Though Merton’s theory is not fully reflected in the Chinese stock market, investor recognition is considered an important risk factor in the Chinese stock market. Originality/value No works have yet investigated the validity of Merton’s “investor cognition hypothesis” in relation to the Chinese stock market. This paper strives to fill this gap.

scholarly journals Research on the Relationship between Trade Volatility, Property Rights and New Energy Stock Returns under the Background of New Energy Industry Development

2021 ◽  
Vol 292 ◽  
pp. 02017
Author(s):  
Qiyuan Peng
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Automobile Industry ◽  
Significant Negative Correlation ◽  
Idiosyncratic Volatility ◽  
Chinese Stock Market ◽  
Cross Sectional ◽  
New Energy ◽  
Trade Volatility ◽  
The Relationship

The research on the relationship between risk and return of new energy stocks is the focus of financial research. Related research focuses more on the relationship between idiosyncratic fluctuation risk and stock returns. In the Chinese stock market, some Chinese investors clearly prefer stocks with high risk characteristics, which leads to overvalued stocks. However, the short-selling restrictions in the Chinese stock market and the heterogeneity of investors have also led to a significant negative correlation between idiosyncratic volatility and cross-sectional yield. There are many studies on the relationship between idiosyncratic volatility and stock returns, but no consistent conclusions have been drawn, and there is a lack of relevant research on new energy stocks. Therefore. This paper collates the data of 70 listed companies in the new energy and new energy automobile industry from 2017 to 2019, tracks the stock returns of sample companies for 3 years (36 months), and conducts in-depth research on the relationship between idiosyncratic fluctuation risks and new energy stock returns. To further verify and supplement the risk-return relationship of China's new energy stock market and provide a certain basis for the company's decision-making behaviour.

Evidence for Some Underlying Time Series Momentum

2014 ◽  
pp. 205-217
Author(s):  
Faten Zoghlami
Keyword(s):  
Time Series ◽  
Stock Market ◽  
Stock Returns ◽  
Excess Returns ◽  
Momentum Strategy ◽  
Cross Sectional ◽  
Times Series ◽  
Before And After ◽  
Main Driver ◽  
Full Rationality

The chapter documents significant and momentary momentum pattern in stock returns times series. Moreover, the chapter gives evidence that this time series momentum is the main driver of the cross-sectional momentum pattern. The temporary time series momentum pattern is midway between the behavioural and rational financial theories. Given the strong and positive autocorrelation in stock returns time series, the authors argue that investors are temporary under reacting, and they progressively find their full rationality. Using monthly returns inherent to all stocks listed on Tunisian stock market, from January 2000 to December 2009, the authors examine momentum strategy’s excess returns before and after considering time series momentum in stocks returns. Results show that momentum strategy is still profitable, but no longer puzzling. Furthermore, the chapter aims to reconcile between the behavioural and the rational financial theories, through the introduction of the progressive investors rationality.

scholarly journals Presence and Sources of Contrarian Profits in the Bangladesh Stock Market

2018 ◽  
Vol 20 (1) ◽  
pp. 84-104
Author(s):  
Shah Saeed Hassan Chowdhury ◽  
Rashida Sharmin ◽  
M Arifur Rahman
Keyword(s):  
Time Series ◽  
Stock Market ◽  
Stock Returns ◽  
Common Factor ◽  
Relative Strength ◽  
Specific Information ◽  
Cross Sectional ◽  
Market Sentiment ◽  
Holding Period ◽  
Momentum Profits

This article, using weekly data for the period 2002 through 2013, investigates the presence of both contrarian and momentum profits and their sources in the Bangladesh stock market. It follows the methodology of Lo and MacKinlay ( Review of Financial Studies, 1990, 3(2), 175–205) to form portfolios with a weighted relative strength scheme (WRSS). The methodology of Jegadeesh and Titman ( Review of Financial Studies, 1995, 8(4), 973–993) is used to decompose the contrarian/momentum profits into three elements: compensation for cross-sectional risk, lead–lag effect in time series with respect to the common factor and the time-series pattern of stock returns. Results provide the evidence of significant contrarian profits for the holding period of one through eight weeks. There is a stronger presence of contrarian profits during 2002–2008 sub-period. The time-series pattern is found to be the main source of contrarian profits, suggesting that idiosyncratic (firm-specific) information is the main contributor to contrarian profits. Interestingly, the influence of idiosyncratic information on such profits has gradually decreased since 2008. Contrarian profits are robust to market sentiment and other systematic risk factors.

Stock Market Anomalies

2017 ◽  
Author(s):  
Steve Fan ◽  
Linda Yu
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Financial Economic ◽  
Economic Research ◽  
Market Anomalies ◽  
Cross Sectional ◽  
Additional Risk ◽  
Asset Pricing Models ◽  
Stock Market Anomalies

Stock market anomalies representing the predictability of cross-sectional stock returns are one of most controversial topics in financial economic research. This chapter reviews several well-documented and pervasive anomalies in the literature, including investment-related anomalies, value anomalies, momentum and long-term reversal, size, and accruals. Although anomalies are widely accepted, much disagreement exists on the underlying reasons for their predictability. This chapter surveys two competing theories that attempt to explain the presence of stock market anomalies: rational and behavioral. The rational explanation focuses on the improvement of the existing asset pricing models and/or searching for additional risk factors to explain the existence of anomalies. By contrast, the behavioral explanation attributes the predictability to human behavioral biases in collecting and processing financial information, as well as in making investment decisions.

scholarly journals Previsibilidade de Retorno das Ações na Bovespa: Um Teste Envolvendo o Modelo de Fator de Retorno Esperado

2004 ◽  
Vol 2 (2) ◽  
pp. 183
Author(s):  
Luciano Martin Rostagno ◽  
Gilberto De Oliveira Kloeckner ◽  
João Luiz Becker
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Trading Volume ◽  
Factor Model ◽  
Explanatory Power ◽  
Return Predictability ◽  
Expected Return ◽  
Cross Sectional ◽  
Theoretical Assumptions ◽  
History Of

This paper examines the hypothesis of asst return predictability in the Brazilian Stock Market (Bovespa). Evidence suggests that seven factors explain most of the monthly differential returns of the stocks included in the sample. Within the factors that present statistically significant mean, two are liquidity factors (market capitalization and trading volume trend), three refer to price level of stocks (dividend to price, dividend to price trend, and cash flow to price), and two relate to price history of stocks (3 and 12 months excess return). Contradicting theoretical assumptions, risk factors present no explanatory power on cross-sectional returns. Using an expected return factor model, it is contended that stock returns are quite predictable. An investment simulation shows that the model is able to assemble portfolios with statistically significant higher returns. Additional tests indicate that the winner portfolios are not fundamentally riskier suggesting mispricing of assets in the Brazilian stock Market.

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