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Low liquidity beta anomaly in China

Michael Frömmel (UGent) , Xing Han, Youwei Li and Samuel A. Vigne
(2022) EMERGING MARKETS REVIEW. 50.
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Abstract
The conventional risk-based theory does not reconcile with the liquidity-beta anomaly in China: Low liquidity-beta stocks outperform high liquidity-beta stocks on a risk-adjusted basis. This striking pattern is robust to different weighting schemes, competing factor models, and other well-known return determinants in the cross section. We propose a competing behavioral-based explanation on the low liquidity beta anomaly in China. Consistent with our new perspective, liquidity beta is a negative return predictor in the cross section. Moreover, the time variation of the return differential between low and high liquidity beta stocks is led by investor sentiment after accounting for other possible economic mechanism.
Keywords
Liquidity, Liquidity beta, Sentiment, Asset pricing, China, INVESTOR SENTIMENT, CROSS-SECTION, MARKET LIQUIDITY, STOCK RETURNS, RISK, COMMONALITY, ILLIQUIDITY, FREQUENCY, MOMENTUM, PRICES

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MLA
Frömmel, Michael, et al. “Low Liquidity Beta Anomaly in China.” EMERGING MARKETS REVIEW, vol. 50, 2022, doi:10.1016/j.ememar.2021.100832.
APA
Frömmel, M., Han, X., Li, Y., & Vigne, S. A. (2022). Low liquidity beta anomaly in China. EMERGING MARKETS REVIEW, 50. https://doi.org/10.1016/j.ememar.2021.100832
Chicago author-date
Frömmel, Michael, Xing Han, Youwei Li, and Samuel A. Vigne. 2022. “Low Liquidity Beta Anomaly in China.” EMERGING MARKETS REVIEW 50. https://doi.org/10.1016/j.ememar.2021.100832.
Chicago author-date (all authors)
Frömmel, Michael, Xing Han, Youwei Li, and Samuel A. Vigne. 2022. “Low Liquidity Beta Anomaly in China.” EMERGING MARKETS REVIEW 50. doi:10.1016/j.ememar.2021.100832.
Vancouver
1.
Frömmel M, Han X, Li Y, Vigne SA. Low liquidity beta anomaly in China. EMERGING MARKETS REVIEW. 2022;50.
IEEE
[1]
M. Frömmel, X. Han, Y. Li, and S. A. Vigne, “Low liquidity beta anomaly in China,” EMERGING MARKETS REVIEW, vol. 50, 2022.
@article{8710870,
  abstract     = {{The conventional risk-based theory does not reconcile with the liquidity-beta anomaly in China: Low liquidity-beta stocks outperform high liquidity-beta stocks on a risk-adjusted basis. This striking pattern is robust to different weighting schemes, competing factor models, and other well-known return determinants in the cross section. We propose a competing behavioral-based explanation on the low liquidity beta anomaly in China. Consistent with our new perspective, liquidity beta is a negative return predictor in the cross section. Moreover, the time variation of the return differential between low and high liquidity beta stocks is led by investor sentiment after accounting for other possible economic mechanism.}},
  articleno    = {{100832}},
  author       = {{Frömmel, Michael and Han, Xing and Li, Youwei and Vigne, Samuel A.}},
  issn         = {{1566-0141}},
  journal      = {{EMERGING MARKETS REVIEW}},
  keywords     = {{Liquidity,Liquidity beta,Sentiment,Asset pricing,China,INVESTOR SENTIMENT,CROSS-SECTION,MARKET LIQUIDITY,STOCK RETURNS,RISK,COMMONALITY,ILLIQUIDITY,FREQUENCY,MOMENTUM,PRICES}},
  language     = {{eng}},
  pages        = {{17}},
  title        = {{Low liquidity beta anomaly in China}},
  url          = {{http://doi.org/10.1016/j.ememar.2021.100832}},
  volume       = {{50}},
  year         = {{2022}},
}
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