A lottery-preference-based explanation of realized kurtosis puzzle in Chinese stock market

High kurtosis corresponds to fat tails on both sides and under risk-aversion assumption investors' dislike of left-tail loss outweighs their preference for right-tail gain. Therefore, high kurtosis characteristic of stock should predict high expected returns. However, the high-frequency-data-ba...

Full description

Saved in:
Bibliographic Details
Published inApplied economics Vol. 51; no. 50; pp. 5466 - 5481
Main Authors Chen, Guojin, Ding, Jie, Zhao, Xiangqin
Format Journal Article
LanguageEnglish
Published London Routledge 27.10.2019
Taylor & Francis Ltd
Subjects
Body fat
Chinese stock market
Economic analysis
Economic theory
Investments
Kurtosis
lottery preference
Realized kurtosis puzzle
Securities markets
Stock exchanges
stock pricing
Online AccessGet full text

Cover

Abstract High kurtosis corresponds to fat tails on both sides and under risk-aversion assumption investors' dislike of left-tail loss outweighs their preference for right-tail gain. Therefore, high kurtosis characteristic of stock should predict high expected returns. However, the high-frequency-data-based empirical results on Chinese stock market are just the opposite, which we refer to as the 'realized kurtosis puzzle'. Using the double sorts and firm-level cross-sectional regression methods, we further demonstrate investors' preference for lottery-like stocks or lottery preference is key to solve the puzzle. Our further empirical research verifies stocks with higher retail investors' shareholding proportion and unavailable for short show stronger 'realized kurtosis puzzle'. In addition, the puzzle is particularly significant in high lottery preference periods while less apparent in low lottery preference times.
AbstractList High kurtosis corresponds to fat tails on both sides and under risk-aversion assumption investors' dislike of left-tail loss outweighs their preference for right-tail gain. Therefore, high kurtosis characteristic of stock should predict high expected returns. However, the high-frequency-data-based empirical results on Chinese stock market are just the opposite, which we refer to as the 'realized kurtosis puzzle'. Using the double sorts and firm-level cross-sectional regression methods, we further demonstrate investors' preference for lottery-like stocks or lottery preference is key to solve the puzzle. Our further empirical research verifies stocks with higher retail investors' shareholding proportion and unavailable for short show stronger 'realized kurtosis puzzle'. In addition, the puzzle is particularly significant in high lottery preference periods while less apparent in low lottery preference times.
Author Chen, Guojin
Ding, Jie
Zhao, Xiangqin
Author_xml – sequence: 1
  givenname: Guojin
  surname: Chen
  fullname: Chen, Guojin
  organization: Wang Yanan Institute for Studies in Economics, Xiamen University
– sequence: 2
  givenname: Jie
  orcidid: 0000-0001-6287-3251
  surname: Ding
  fullname: Ding, Jie
  email: jaynewton@163.com
  organization: School of Economics, Xiamen University
– sequence: 3
  givenname: Xiangqin
  surname: Zhao
  fullname: Zhao, Xiangqin
  organization: School of Economics, Xiamen University
BookMark eNp9UMtOwzAQtFCRaAufgGSJc4ofsZPeqCpeEhIXuHCxHGct0qZ2sB1B-_UkarlyWu1qZnZmZmjivAOErilZUFKSW0IIl2UuF4zQ5YJKygUlZ2hKcymznJV8gqYjJhtBF2gW42ZYKePFFH2scOtTgrDPugAWAjgDWaUj1Bh-ulY7nRrvsLc4gG6bw3Df9iH52ETc9YdDC7hxeP3ZOIiAY_Jmi3c6bCFdonOr2whXpzlH7w_3b-un7OX18Xm9esnM4C1lpWFQG6lrQUAISiumRb6sWM5IIUltcsFFqStaCKPHmDmn0ubGMg7EguB8jm6Oul3wXz3EpDa-D254qRiTBZHLgpQDShxRJvgYh6iqC81gdK8oUWON6q9GNdaoTjUOvLsjr3HWh53-9qGtVdL71gcbtDNNVPx_iV-8Tns0
CitedBy_id crossref_primary_10_1016_j_bir_2024_06_009
crossref_primary_10_1007_s12525_021_00485_0
crossref_primary_10_1016_j_najef_2024_102078
Cites_doi 10.1016/S0304-405X(99)00050-1
10.1016/j.jfineco.2016.02.013
10.1016/j.jfineco.2010.08.014
10.1111/j.1540-6261.2006.00836.x
10.1086/260061
10.1111/j.1540-6261.1992.tb04398.x
10.1016/0304-405X(93)90023-5
10.1017/S0022109013000100
10.1111/j.1540-6261.1983.tb03830.x
10.1086/295472
10.1093/jjfinec/nbh001
10.1111/j.1540-6261.1993.tb04702.x
10.1111/j.1540-6261.2012.01795.x
10.1257/aer.98.5.2066
10.2307/1924119
10.1016/j.jfineco.2015.02.009
10.1111/j.1540-6261.1990.tb05110.x
10.3905/joi.2017.26.4.081
10.1111/j.1540-6261.2008.01419.x
10.2307/2326275
10.1016/S1386-4181(01)00024-6
10.1093/rfs/16.1.0101
10.2469/faj.v58.n1.2506
10.1111/jofi.12286
10.2307/2977928
10.1093/rfs/hhp041
10.1016/j.jfineco.2012.07.002
10.2307/2937816
10.1111/j.1540-6261.1997.tb03808.x
10.1016/j.jfineco.2007.12.005
10.1017/S002210900000274X
10.1016/S0304-405X(01)00066-6
10.1198/073500106000000071
10.1111/j.1540-6261.2009.01483.x
10.1111/0022-1082.00247
ContentType Journal Article
Copyright 2019 Informa UK Limited, trading as Taylor & Francis Group 2019
2019 Informa UK Limited, trading as Taylor & Francis Group
Copyright_xml – notice: 2019 Informa UK Limited, trading as Taylor & Francis Group 2019
– notice: 2019 Informa UK Limited, trading as Taylor & Francis Group
DBID AAYXX
CITATION
8BJ
FQK
JBE
DOI 10.1080/00036846.2019.1613510
DatabaseName CrossRef
International Bibliography of the Social Sciences (IBSS)
International Bibliography of the Social Sciences
International Bibliography of the Social Sciences
DatabaseTitle CrossRef
International Bibliography of the Social Sciences (IBSS)
DatabaseTitleList International Bibliography of the Social Sciences (IBSS)
DeliveryMethod fulltext_linktorsrc
Discipline Economics
EISSN 1466-4283
EndPage 5481
ExternalDocumentID 10_1080_00036846_2019_1613510
1613510
Genre Articles
GrantInformation_xml – fundername: National Natural Science Foundation of China
  grantid: 71471154
  funderid: 10.13039/501100001809
– fundername: National Natural Science Foundation of China
  grantid: 16BJ52028
  funderid: 10.13039/501100001809
GroupedDBID -~X
.7I
.QK
0BK
0R~
23M
2DF
3R3
3YN
4.4
5GY
5VS
6J9
8VB
AAAVI
AABCJ
AAGZJ
AAMFJ
AAMIU
AAPUL
AATTQ
AAZMC
ABBKH
ABFIM
ABJVF
ABLIJ
ABLJU
ABPEM
ABPTX
ABQHQ
ABSSG
ABXUL
ABZLS
ACGFO
ACGFS
ACHQT
ACLSK
ACNCT
ACTIO
ADAHI
ADCVX
ADLRE
ADXPE
AECIN
AEGXH
AEGYZ
AEISY
AEKEX
AEMOZ
AEOZL
AEZRU
AFOLD
AFWLO
AGDLA
AGMYJ
AGRBW
AIAGR
AIJEM
AJWEG
AKBVH
AKVCP
ALMA_UNASSIGNED_HOLDINGS
ALQZU
AVBZW
AWYRJ
BEJHT
BLEHA
BMOTO
BOHLJ
CCCUG
COF
CQ1
CS3
DGFLZ
DKSSO
EBE
EBO
EBR
EBS
EBU
EJD
EMK
EOH
EPL
E~B
E~C
F5P
FD6
FUNRP
G-F
H13
HF~
HZ~
H~9
IPNFZ
J.O
KDLKA
KYCEM
L7B
LJTGL
M4Z
NA5
NW~
O9-
OFU
P2P
PQEST
PQQKQ
QWB
RIG
RNANH
ROSJB
RSYQP
RWL
S-F
STATR
TAE
TEK
TFH
TFL
TFW
TH9
TN5
TNTFI
TRJHH
U5U
UPT
UT5
UT9
V1K
VAE
WH7
ZL0
~01
~S~
AAYXX
ABJNI
ABXYU
ADKVQ
AHDZW
CITATION
K1G
TBQAZ
TDBHL
TUROJ
8BJ
ADMHG
FQK
JBE
ID FETCH-LOGICAL-c428t-8c2edc6ad50e5511b2a549b2420760dc45358ab175ca36844316f4cf23e0fe533
ISSN 0003-6846
IngestDate Thu Oct 10 21:52:56 EDT 2024
Fri Aug 23 02:19:53 EDT 2024
Tue Jun 13 19:29:57 EDT 2023
IsPeerReviewed true
IsScholarly true
Issue 50
Language English
LinkModel OpenURL
MergedId FETCHMERGED-LOGICAL-c428t-8c2edc6ad50e5511b2a549b2420760dc45358ab175ca36844316f4cf23e0fe533
ORCID 0000-0001-6287-3251
PQID 2267069708
PQPubID 37902
PageCount 16
ParticipantIDs proquest_journals_2267069708
informaworld_taylorfrancis_310_1080_00036846_2019_1613510
crossref_primary_10_1080_00036846_2019_1613510
PublicationCentury 2000
PublicationDate 2019-10-27
PublicationDateYYYYMMDD 2019-10-27
PublicationDate_xml – month: 10
  year: 2019
  text: 2019-10-27
  day: 27
PublicationDecade 2010
PublicationPlace London
PublicationPlace_xml – name: London
PublicationTitle Applied economics
PublicationYear 2019
Publisher Routledge
Taylor & Francis Ltd
Publisher_xml – name: Routledge
– name: Taylor & Francis Ltd
References CIT0030
CIT0010
CIT0032
CIT0031
CIT0012
Darlington R. B. (CIT0020) 1970; 24
CIT0011
CIT0033
CIT0014
CIT0036
CIT0013
CIT0035
CIT0016
CIT0038
CIT0015
CIT0037
CIT0018
CIT0017
CIT0019
CIT0021
CIT0001
CIT0023
CIT0022
Lin T. C. (CIT0034) 2018; 5
CIT0003
CIT0025
CIT0002
CIT0024
CIT0005
CIT0027
CIT0004
CIT0026
CIT0007
CIT0029
CIT0006
CIT0028
CIT0009
References_xml – ident: CIT0006
  doi: 10.1016/S0304-405X(99)00050-1
– ident: CIT0027
  doi: 10.1016/j.jfineco.2016.02.013
– ident: CIT0010
  doi: 10.1016/j.jfineco.2010.08.014
– ident: CIT0004
  doi: 10.1111/j.1540-6261.2006.00836.x
– ident: CIT0021
  doi: 10.1086/260061
– ident: CIT0022
  doi: 10.1111/j.1540-6261.1992.tb04398.x
– ident: CIT0023
  doi: 10.1016/0304-405X(93)90023-5
– ident: CIT0024
  doi: 10.1017/S0022109013000100
– ident: CIT0031
  doi: 10.1111/j.1540-6261.1983.tb03830.x
– ident: CIT0013
  doi: 10.1086/295472
– ident: CIT0012
  doi: 10.1093/jjfinec/nbh001
– ident: CIT0029
  doi: 10.1111/j.1540-6261.1993.tb04702.x
– ident: CIT0019
  doi: 10.1111/j.1540-6261.2012.01795.x
– ident: CIT0011
  doi: 10.1257/aer.98.5.2066
– ident: CIT0035
  doi: 10.2307/1924119
– ident: CIT0002
  doi: 10.1016/j.jfineco.2015.02.009
– ident: CIT0028
  doi: 10.1111/j.1540-6261.1990.tb05110.x
– ident: CIT0014
  doi: 10.3905/joi.2017.26.4.081
– ident: CIT0001
  doi: 10.1111/j.1540-6261.2008.01419.x
– ident: CIT0030
  doi: 10.2307/2326275
– volume: 5
  start-page: 1841
  year: 2018
  ident: CIT0034
  publication-title: Review of Finance
  contributor:
    fullname: Lin T. C.
– ident: CIT0003
  doi: 10.1016/S1386-4181(01)00024-6
– ident: CIT0007
  doi: 10.1093/rfs/16.1.0101
– ident: CIT0038
  doi: 10.2469/faj.v58.n1.2506
– ident: CIT0037
  doi: 10.1111/jofi.12286
– ident: CIT0036
  doi: 10.2307/2977928
– ident: CIT0015
  doi: 10.1093/rfs/hhp041
– ident: CIT0017
  doi: 10.1016/j.jfineco.2012.07.002
– ident: CIT0033
  doi: 10.2307/2937816
– ident: CIT0016
  doi: 10.1111/j.1540-6261.1997.tb03808.x
– ident: CIT0005
  doi: 10.1016/j.jfineco.2007.12.005
– ident: CIT0009
  doi: 10.1017/S002210900000274X
– ident: CIT0018
  doi: 10.1016/S0304-405X(01)00066-6
– ident: CIT0025
  doi: 10.1198/073500106000000071
– ident: CIT0032
  doi: 10.1111/j.1540-6261.2009.01483.x
– ident: CIT0026
  doi: 10.1111/0022-1082.00247
– volume: 24
  start-page: 19
  year: 1970
  ident: CIT0020
  publication-title: The American Statistician
  contributor:
    fullname: Darlington R. B.
SSID ssj0001237
Score 2.299792
Snippet High kurtosis corresponds to fat tails on both sides and under risk-aversion assumption investors' dislike of left-tail loss outweighs their preference for...
SourceID proquest
crossref
informaworld
SourceType Aggregation Database
Publisher
StartPage 5466
SubjectTerms Body fat
Chinese stock market
Economic analysis
Economic theory
Investments
Kurtosis
lottery preference
Realized kurtosis puzzle
Securities markets
Stock exchanges
stock pricing
Title A lottery-preference-based explanation of realized kurtosis puzzle in Chinese stock market
URI https://www.tandfonline.com/doi/abs/10.1080/00036846.2019.1613510
https://www.proquest.com/docview/2267069708
Volume 51
hasFullText 1
inHoldings 1
isFullTextHit
isPrint
link http://utb.summon.serialssolutions.com/2.0.0/link/0/eLvHCXMwpV1Lj9MwELZg9wAXxFMsuyAfuK1cNbHzOla7QLUSnHZF1UtkOw4USlK26WH765mJH5uKIl6XqHLbRJr5PPPZ8XxDyGtR6DyvopqJjFcMWxozCcBiVaQgQ1QGZiHWDr__kE6vxMUsmd3KE_TVJZ0a6e3eupJ_8SqMgV-xSvYvPBtuCgPwGfwLV_AwXP_Ix5PTZYvVODdsFdqFMMxLFSr3L2UT-CBQw-ViC-NfN9ddiyIkq812u-wVQ7CFtlmj0izExtNvfRn0kLN6ompcDXNg4WeusuPdpv2yCCA7d11SLhYBM_PPst-RnQEWP313P3VbDVGBMdpW7u85o-QDKmdp7nYRjY2hIk0Z6rgNg6xTlbVgslKzLmQmIk0H6RdWUNHe0B7OQnJ8Hh7KK0ZAV3nijsXuqma7b-6SwxgiEIS-w8n0fP4xJGlI2Jlvpoj388VdKLu-7xE7tGVH1PanJN4zk8uH5IFbUtCJxccjcsc0j8k9X3G-fkLmE_ornNABTmhbU48T6nFCLU7ooqEOJ7THCbU4eUqu3r65PJsy11ODaXBJx3Idm0qnskrGBshypGKZiEIBUcNXtJUWCU9yqYBUaolWQKWEWug65mZcG1gbPCMHTduY54QqnWU8M7qQuRKax0UU61rnQAljlcRaHpGRN1m5stIpZRQUaa2NS7Rx6Wx8RIqhYcuu37OqbYOZkv_mvyfeC6WboesSlhbZOC2ycf7iP259TO7fToYTctBdb8xLYKKdeuVQ9QNwoIO5
link.rule.ids 315,783,787,27936,27937,59979,60768
linkProvider Library Specific Holdings
linkToHtml http://utb.summon.serialssolutions.com/2.0.0/link/0/eLvHCXMwpV1LTwIxEG4MHPDi24ii9uC1yL7o7pEYyYrAwUBCvDTbbjchIBB2SZRf78w-CGiMB667abNtp_N97c43Q8iD7SnXDY2I2dwKGZY0ZgEYFgsNCQgRatiFqB3u9Zv-0O6MnNGWFgbDKvEMHWWJIlJfjZsbL6OLkLjHNIsKACdGZnl14CyWgyqrsuN5HCy7PHjr-P7GH4Nv5kXdPGxV6Hj-6mgHoXbyl_7y1ykItY-JKj4_iz2Z1FeJrKv1j8yO-43vhBzlHJW2MqM6JQd6dkYqhYQ5PifvLTqdowzoiy02dUoYAmJI9ediGmRXjHQeUeCk0_Eank9Wy2Qej2O6WK3XU03HM4q1u3WsKfBPNaEfqf76ggzbz4Mnn-VFGpiCk0vCXGXqUDWD0GloYF-GNAM4ckpAfvznFyrbsRw3kMBSVICDQul9ZKvItHQj0kA2L0lpNp_pK0Kl4tziWnmBK21lmZ5hqki5wDFM6ZgqqJJ6sTBikeXiEMYmxWk2ZQKnTORTViXe9vKJJL0EibKKJcL6p22tWGuRb-tYAFfljabHG-71Hl3fk4o_6HVF96X_ekMO8RWioclrpJQsV_oWaE4i73I7_gYgw--R
linkToPdf http://utb.summon.serialssolutions.com/2.0.0/link/0/eLvHCXMwpV1JS8NAFB6kBfXiLtZ1Dl6nNluTHIta4lZEFMTLkNmgtLahSUHz630vS3FBPHhNmGHW930z8773CDl1QxkEyjLM9R3FMKUxi2FhMWUJQAilYReidvhu0I2e3Otnr_YmTCu3SjxDmzJQRGGrcXMnytQecWdFEBXATXTMCttAWRwPRVbNLr4qNUjz8eE6ihbmGEyzX6fNw1K1jOe3ir4A1JfwpT_MdYFB_XUi6taXriej9jwTbZl_C-z4r-5tkLWKodJeuaQ2yZKebJGVWsCcbpOXHh1PUQT0zpJFlhKGcKiofkvGcXnBSKeGAiMdD3P4PprPsmk6TGkyz_OxpsMJxczdOtUU2Kcc0ddCfb1DnvqXj-cRq1I0MAnnlowF0tZKdmPldTRwL0vYMRw4BeA-vvgp6XqOF8QCOIqMsVMovDeuNLajO0YD1dwljcl0ovcIFdL3HV_LMA6EKx07tGxpZAAMwxaeLeMWadfzwpMyEge3FgFOyyHjOGS8GrIWCT_PHs-KKxBT5ivhzh9lD-up5tWmTjkwVb_TDf1OsP-Pqk_I8v1Fn99eDW4OyCr-QSi0_UPSyGZzfQQcJxPH1Sr-ADSl7jU
openUrl ctx_ver=Z39.88-2004&ctx_enc=info%3Aofi%2Fenc%3AUTF-8&rfr_id=info%3Asid%2Fsummon.serialssolutions.com&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.atitle=A+lottery-preference-based+explanation+of+realized+kurtosis+puzzle+in+Chinese+stock+market&rft.jtitle=Applied+economics&rft.au=Chen%2C+Guojin&rft.au=Ding%2C+Jie&rft.au=Zhao%2C+Xiangqin&rft.date=2019-10-27&rft.pub=Routledge&rft.issn=0003-6846&rft.eissn=1466-4283&rft.volume=51&rft.issue=50&rft.spage=5466&rft.epage=5481&rft_id=info:doi/10.1080%2F00036846.2019.1613510&rft.externalDocID=1613510
thumbnail_l http://covers-cdn.summon.serialssolutions.com/index.aspx?isbn=/lc.gif&issn=0003-6846&client=summon
thumbnail_m http://covers-cdn.summon.serialssolutions.com/index.aspx?isbn=/mc.gif&issn=0003-6846&client=summon
thumbnail_s http://covers-cdn.summon.serialssolutions.com/index.aspx?isbn=/sc.gif&issn=0003-6846&client=summon