Advanced Search
MyIDEAS: Login

Heterogeneous Beliefs, a Short-Sale Restriction, and the Cross Section of Stock Returns: An Evidence from China

Contents:

Author Info

  • Shin S. Ikeda

    (National Graduate Institute for Policy Studies)

  • Yan Zhang

    (National Graduate Institute for Policy Studies)

Registered author(s):

    Abstract

    We find a negative cross-sectional relation between heterogeneous beliefs and future stock returns in China, where short sale is prohibited in our sample period. Compared to other empirical works, which often be done in a market without short sale prohibition, we obtain this strong negative results after controlling several characteristics of stocks, such as size, leverage, book to market ratio and momentum. This negative relationship supports theoretical conjecture on heterogeneous beliefs (Miller(1977)). Our heterogeneous beliefs proxy is unexplained turnover, which is turnover of individual stocks adjusted by market turnover and its momentum. We also control the liquidity and idiosyncratic uncertainty in the robust test. These two factors are often attributed to the reason of the negative relation between turnover and future returns.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://r-center.grips.ac.jp/gallery/docs/12-12.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by National Graduate Institute for Policy Studies in its series GRIPS Discussion Papers with number 12-12.

    as in new window
    Length: 17 pages
    Date of creation: Oct 2012
    Date of revision:
    Handle: RePEc:ngi:dpaper:12-12

    Contact details of provider:
    Postal: 7-22-1 Roppongi, Minato-ku, Tokyo, Japan 106-8677
    Phone: +81-(0)3-6439-6000
    Fax: +81-(0)3-6439-6010
    Web page: http://r-center.grips.ac.jp/DiscussionPapers
    More information through EDIRC

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Duffie, Darrell & Garleanu, Nicolae & Pedersen, Lasse Heje, 2002. "Securities lending, shorting, and pricing," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 307-339.
    2. Hong, Harrison & Stein, Jeremy, 2007. "Disagreement and the Stock Market," Scholarly Articles 2894690, Harvard University Department of Economics.
    3. Harrison Hong & Jose Scheinkman & Wei Xiong, 2005. "Asset Float and Speculative Bubbles," NBER Working Papers 11367, National Bureau of Economic Research, Inc.
    4. Eugene F. Fama & Kenneth R. French, 2004. "The Capital Asset Pricing Model: Theory and Evidence," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 25-46, Summer.
    5. Doukas, John A. & Kim, Chansog (Francis) & Pantzalis, Christos, 2006. "Divergence of Opinion and Equity Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 41(03), pages 573-606, September.
    6. Jérôme B. Detemple & Shashidhar Murthy, 1997. "Equilibrium Asset Prices and No-Arbitrage with Portfolio Constraints," CIRANO Working Papers 97s-12, CIRANO.
    7. Jon A. Garfinkel & Jonathan Sokobin, 2006. "Volume, Opinion Divergence, and Returns: A Study of Post-Earnings Announcement Drift," Journal of Accounting Research, Wiley Blackwell, vol. 44(1), pages 85-112, 03.
    8. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
    9. Evan W. Anderson & Eric Ghysels & Jennifer L. Juergens, 2005. "Do Heterogeneous Beliefs Matter for Asset Pricing?," Review of Financial Studies, Society for Financial Studies, vol. 18(3), pages 875-924.
    10. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
    11. Miller, Edward M, 1977. "Risk, Uncertainty, and Divergence of Opinion," Journal of Finance, American Finance Association, vol. 32(4), pages 1151-68, September.
    12. Charles M.C. Lee & Bhaskaran Swaminathan, 2000. "Price Momentum and Trading Volume," Journal of Finance, American Finance Association, vol. 55(5), pages 2017-2069, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ngi:dpaper:12-12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.