IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v55y2019i5p1184-1198.html
   My bibliography  Save this article

Abnormal Returns and Idiosyncratic Volatility Puzzle: Evidence from the Chinese Stock Market

Author

Listed:
  • Zhengyang Qu
  • Xiaotian Liu
  • Shi He

Abstract

The well-documented idiosyncratic volatility anomaly indicates the stocks with higher idiosyncratic volatility tend to have lower returns. Using different models to estimate abnormal return (i.e. alpha), we show that in the Chinese stock market, the IVOL-return relation is negative among stocks with negative abnormal returns but positive among stocks with positive abnormal returns. A possible explanation is that when we take the expected return as the reference point, different signs of abnormal returns can be viewed as gains and losses. Under prospect theory, distinct risk attitudes in the domain of gains and losses lead to different IVOL-return relations.

Suggested Citation

  • Zhengyang Qu & Xiaotian Liu & Shi He, 2019. "Abnormal Returns and Idiosyncratic Volatility Puzzle: Evidence from the Chinese Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(5), pages 1184-1198, April.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:5:p:1184-1198
    DOI: 10.1080/1540496X.2018.1468249
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1540496X.2018.1468249
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1540496X.2018.1468249?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liu, Hao & Chen, Yue & Wan, Wei & Zhang, Qun, 2021. "A novel explanation for idiosyncratic volatility anomaly: An asset decomposition perspective," Economics Letters, Elsevier, vol. 206(C).
    2. Chen, Chun & He, Fangyi & Lin, Lei, 2024. "Anchoring effect, prospect value and stock return," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1539-1556.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:55:y:2019:i:5:p:1184-1198. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.