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Arbitrage risk and the turnover anomaly

  • Chou, Pin-Huang
  • Huang, Tsung-Yu
  • Yang, Hung-Jeh
Registered author(s):

    A strong turnover premium exists such that stocks with lower turnover have higher future returns in the 5years following their formation than those with higher turnover. This turnover premium cannot be explained by existing asset-pricing models, a risk-based liquidity factor, or anomalies such as size, book-to-market ratio, or momentum. Further analysis indicates that the turnover premium is greater for stocks with higher idiosyncratic volatility, higher transaction costs, lower institutional ownership, and lower investor sophistication, which implies it is consistent with the mispricing explanation based on arbitrage risk.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378426613002811
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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 37 (2013)
    Issue (Month): 11 ()
    Pages: 4172-4182

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    Handle: RePEc:eee:jbfina:v:37:y:2013:i:11:p:4172-4182
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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