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Types of Shares and Idiosyncratic Risk

Author

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  • Jen-Sin Lee
  • Chu-Yun Wei

Abstract

This study seeks to examine whether being listed as a particular type of share (H share, red-chip stock, Taiwan-based stock, or Hong Kong local stock) on the main board of the Hong Kong Exchange will affect the idiosyncratic risks and market risks. The findings are as follows: (1) different political connections mainly affect idiosyncratic risk, (2) the hypothesis of big size with high market risk is supported, (3) the idiosyncratic risks of all the companies in each category taken by category are negatively correlated with expected short-run returns. These results mean that investors should hold the stocks with previous low idiosyncratic risk to earn high expected returns.

Suggested Citation

  • Jen-Sin Lee & Chu-Yun Wei, 2012. "Types of Shares and Idiosyncratic Risk," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(S3), pages 68-95, September.
    • Handle: RePEc:mes:emfitr:v:48:y:2012:i:s3:p:68-95
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    Cited by:

    1. Shahzad, Farrukh & Fareed, Zeeshan & Wang, Zhenkun & Shah, Syed Ghulam Meran, 2020. "Do idiosyncratic risk, market risk, and total risk matter during different firm life cycle stages?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 537(C).
    2. Berggrun, Luis & Lizarzaburu, Edmundo & Cardona, Emilio, 2016. "Idiosyncratic volatility and stock returns: Evidence from the MILA," Research in International Business and Finance, Elsevier, vol. 37(C), pages 422-434.

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