Stock Return Asymmetry in China

50 Pages Posted: 19 Feb 2021 Last revised: 18 Mar 2021

See all articles by Ke Wu

Ke Wu

Renmin University of China

Yifeng Zhu

School of Finance, Central University of Finance and Economics

Dongxu Chen

Renmin University of China

Date Written: December 20, 2020

Abstract

In this paper, we find that the upside asymmetry calculated based on a new distribution-based asymmetry measure proposed by Jiang, Wu, Zhou, and Zhu (2020) is negatively related to average future returns in the crosssection of Chinese stock returns. By contrast, when using a conventional skewness measure, the relationship between asymmetry and average returns is unclear. Furthermore, the asymmetry factor constructed from the new asymmetry measure cannot be explained by the three-factor (CH-3) and four-factor (CH-4) models proposed by Liu, Stambaugh, and Yuan (2019). When augmenting the CH-3 model with our asymmetry factor, the new four-factor
model is able to explain 33 anomalies out of a universe of 37 significant anomalies in the Chinese stock market.

Keywords: Stock return asymmetry, anomaly, factor model

JEL Classification: G11, G12

Suggested Citation

Wu, Ke and Zhu, Yifeng and Chen, Dongxu, Stock Return Asymmetry in China (December 20, 2020). Available at SSRN: https://ssrn.com/abstract=3724761 or http://dx.doi.org/10.2139/ssrn.3724761

Ke Wu

Renmin University of China ( email )

59 Zhongguancun Street
Beijing, 100872
China

Yifeng Zhu (Contact Author)

School of Finance, Central University of Finance and Economics ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Dongxu Chen

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

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