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Turnover premia in China's stock markets

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  • Zhang, Bing
  • Chen, Wei
  • Yeh, Chung-Ying

Abstract

This paper explores turnover premia in China's stock markets. There is a negative cross-sectional relation between turnover and average realized returns. Turnover premia, which is the return on buying low turnover stocks and shorting high turnover stocks, can reach 34% per annum. In effect, turnover in China's stock markets can be explained mainly by both liquidity risk and firm-specific uncertainty. Turnover premia are more pronounced for firms with higher cash flow risk, an indicator of firm-specific uncertainty. Cash flow risk could also amplify the turnover premia of option-like firms.

Suggested Citation

  • Zhang, Bing & Chen, Wei & Yeh, Chung-Ying, 2021. "Turnover premia in China's stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:pacfin:v:65:y:2021:i:c:s0927538x20306995
    DOI: 10.1016/j.pacfin.2020.101487
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    More about this item

    Keywords

    China's stock markets; Turnover premia; Aggregate volatility risk; Idiosyncratic volatility; Real options; Cash-flow risk;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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