Idiosyncratic volatility and firm-specific news

Evidence from the Chinese stock market

Bibliographic Data

ID15067840
AuthorsYi Li (0000-0002-3875-3513, Weifang University), Van Hai Hoang (0000-0003-2645-3545, University of Economics, The University of Danang, Da Nang, Vietnam), Cuiping Sun (0000-0003-1690-6950, Weifang University of Science and Technology), Jangwoo Lee (0000-0001-5690-7443, Pusan National University, corresponding author)
Year2023
Volume36
Issue2
Publication date2023-07-10
Open AccessYes
TypeARTICLE
VenueEconomic Research-Ekonomska Istraživanja (JOURNAL)
Journal identifiersISSN: 1331-677X • E-ISSN: 1848-9664
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/1331677x.2023.2173630
OpenAlexW4367675827
LanguageEN
References cited48

This study investigates the effect of firm-specific news on the pricing of idiosyncratic volatility (IVOL) in China. Using a sample of non-financial A-share listed firms from January 2006 to June 2018, we find that the predictive ability of IVOL is much weaker around firm announcements compared to that without news, suggesting that the limited arbitrage cannot disentangle the IVOL puzzle completely in the emerging market. Additionally, we investigate the effect of news sentiment on the predictive ability of IVOL and find that it is much stronger following bad news compared to good news. Finally, when we include the macroeconomic variables known to predict returns to adjust the systematic risk, we obtain novel findings that the negative premium of IVOL becomes insignificant, suggesting that the negative premium is time-varying with macroeconomy

Business · China · Chinese market · Economics · Financial economics · Monetary economics · Stock market · Corporate Finance and Governance · Financial Markets and Investment Strategies · History · Market Dynamics and Volatility

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