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Idiosyncratic volatility and stock price crash risk: Evidence from china

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  • Cao, Jiahui
  • Wen, Fenghua
  • Zhang, Yue
  • Yin, Zhujia
  • Zhang, Yun

Abstract

This paper investigates the relationship between idiosyncratic volatility and the risk of a stock price crash in China. Using a large sample of Chinese listed firms from 2007 to 2018, the evidence shows that stock price crash risk is significantly positively associated with idiosyncratic volatility. Moreover, firms with a higher level of idiosyncratic volatility are more likely to experience a crash in stock price. The results are robust to alternative measures of idiosyncratic volatility and stock price crash risk and the findings advance our understanding about the role of short-selling constraints in managing the risk of a stock price crash.

Suggested Citation

  • Cao, Jiahui & Wen, Fenghua & Zhang, Yue & Yin, Zhujia & Zhang, Yun, 2022. "Idiosyncratic volatility and stock price crash risk: Evidence from china," Finance Research Letters, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001768
    DOI: 10.1016/j.frl.2021.102095
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    2. Hendijani Zadeh, Mohammad, 2023. "Regional social capital and stock price crash risk: Evidence from the US," Finance Research Letters, Elsevier, vol. 51(C).
    3. Benkraiem, Ramzi & Goutte, Stéphane & Saadi, Samir & Zhu, Hui & Zhu, Steven, 2022. "Investor heterogeneity and negative skewness in stock returns: Evidence from institutional investors," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    4. Muhamad Nafik Hadi Ryandono & Mochamad Ali Imron & Muhammad Alkirom Wildan, 2022. "World Oil Prices and Exchange Rates on Islamic Banking Risks," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 409-413, July.

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