Value at Risk and the Cross-Section of Expected Returns: Evidence from China
67 Pages Posted: 27 May 2020 Last revised: 6 Jan 2021
Date Written: December 3, 2020
In the Chinese stock market, we find that the cross-sectional relation between value-at-risk (VaR) and expected returns is unclear, which is different from the recent findings in the United States. Additionally, VaR is negatively related with expected returns and cannot be explained by idiosyncratic volatility, momentum, short-term reversal, or maximum daily return during a high consumer confidence period. In contrast, no significant relation is observed between VaR and expected returns during a period of low consumer confidence.
Keywords: Value-at-Risk, cross-sectional relation, equity returns, consumer confidence
JEL Classification: G11, G12
Suggested Citation: Suggested Citation