Does idiosyncratic volatility matter? — Evidence from Chinese stock market

AbstractInvestors 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.

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

E3S Web of Conferences ◽

10.1051/e3sconf/202129202017 ◽

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.

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