Low liquidity beta anomaly in China

Michael Frömmel, Xing Han, Youwei Li and Samuel A. Vigne

Emerging Markets Review, 2022, vol. 50, issue C

Abstract: The conventional risk-based theory does not reconcile with the liquidity-beta anomaly in China: Low liquidity-beta stocks outperform high liquidity-beta stocks on a risk-adjusted basis. This striking pattern is robust to different weighting schemes, competing factor models, and other well-known return determinants in the cross section. We propose a competing behavioral-based explanation on the low liquidity beta anomaly in China. Consistent with our new perspective, liquidity beta is a negative return predictor in the cross section. Moreover, the time variation of the return differential between low and high liquidity beta stocks is led by investor sentiment after accounting for other possible economic mechanism.

Keywords: Liquidity; Liquidity beta; Sentiment; Asset pricing; China (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:50:y:2022:i:c:s1566014121000406

DOI: 10.1016/j.ememar.2021.100832

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