A lottery-preference-based explanation of realized kurtosis puzzle in Chinese stock market

Guojin Chen, Jie Ding and Xiangqin Zhao

Applied Economics, 2019, vol. 51, issue 50, 5466-5481

Abstract: High kurtosis corresponds to fat tails on both sides and under risk-aversion assumption investors’ dislike of left-tail loss outweighs their preference for right-tail gain. Therefore, high kurtosis characteristic of stock should predict high expected returns. However, the high-frequency-data-based empirical results on Chinese stock market are just the opposite, which we refer to as the ‘realized kurtosis puzzle’. Using the double sorts and firm-level cross-sectional regression methods, we further demonstrate investors’ preference for lottery-like stocks or lottery preference is key to solve the puzzle. Our further empirical research verifies stocks with higher retail investors’ shareholding proportion and unavailable for short show stronger ‘realized kurtosis puzzle’. In addition, the puzzle is particularly significant in high lottery preference periods while less apparent in low lottery preference times.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2019.1613510 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:51:y:2019:i:50:p:5466-5481

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2019.1613510

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().