Does the turnover effect matter in emerging markets? Evidence from China

Tsung-Yu Chen, Ching-Hsiang Chao and Zhen-Xing Wu

Pacific-Basin Finance Journal, 2021, vol. 67, issue C

Abstract: In this paper, we examine the turnover effect in China's stock market and find that stocks with low turnover generate higher future returns than stocks with high turnover. The turnover effect is robust after various liquidity measures are controlled for, and it cannot be explained by existing asset-pricing models. Further evidence reveals that the turnover effect (1) is stronger when sentiment is high; (2) is stronger for stocks with lower investor sophistication, higher idiosyncratic volatility, higher transaction costs, and lower institutional ownership; and (3) persists in longer horizons. These findings are consistent with the mispricing explanation.

Keywords: Turnover; Difference of opinion; Sentiment; Arbitrage risk (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:67:y:2021:i:c:s0927538x21000585

DOI: 10.1016/j.pacfin.2021.101551

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