Does behavioral-motivated volatility effect explain the beta anomaly? Evidence from China

Lu Zhao and Lei Lin

Finance Research Letters, 2022, vol. 46, issue PA

Abstract: We find that the beta anomaly in the Chinese stock market is mainly driven by behavioral effects measured by lottery demand or idiosyncratic risk. The betting against volatility factor that is closely related to behavioral effects produces significant positive alpha, while the alpha of the betting against correlation factor related to leverage constraints is insignificant. When a lottery demand or an idiosyncratic risk factor is added to the well-established factor models, the beta anomaly disappears.

Keywords: Betting against volatility; Lottery demand; Idiosyncratic risk (search for similar items in EconPapers)
JEL-codes: G11 G12 G41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pa:s154461232100307x

DOI: 10.1016/j.frl.2021.102265

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