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The value premium puzzle, behavior versus risk: New evidence from China
Ephraim Clark1; Zhuo Qiao2
2019-04-24
Source PublicationThe Quarterly Review of Economics and Finance
ISSN1062-9769
Abstract

This paper investigates the value premium puzzle in the Chinese stock market. After establishing that the value premium does exist in the Chinese stock market, it uses an innovative technique based on stochastic dominance theory to test the behavior based versus risk based explanations for the puzzle. We find no evidence of a systematic behavioral factor, such as over/under-reaction, that is driving this premium. This finding is robust with respect to negative and positive return regimes. We do, however, find strong evidence that the value premium reflects compensation for bearing more risk associated with financial inflexibility.

KeywordValue Premium Puzzle Risk Financial Inflexibility Stochastic Dominance
DOIhttps://doi.org/10.1016/j.qref.2019.04.007
Indexed BySSCI ; SSCI
Language英语
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Document TypeJournal article
CollectionFaculty of Business Administration
DEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
Corresponding AuthorZhuo Qiao
Affiliation1.Middlesex University Business School, The Burroughs, London, NW4, United Kingdom
2.Faculty of Business Administration, University of Macau, Avenida da Universidade, Taipa, Macau
Corresponding Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Ephraim Clark,Zhuo Qiao. The value premium puzzle, behavior versus risk: New evidence from China[J]. The Quarterly Review of Economics and Finance,2019.
APA Ephraim Clark,&Zhuo Qiao.(2019).The value premium puzzle, behavior versus risk: New evidence from China.The Quarterly Review of Economics and Finance.
MLA Ephraim Clark,et al."The value premium puzzle, behavior versus risk: New evidence from China".The Quarterly Review of Economics and Finance (2019).
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