Downside Risk in the Chinese A-Share Market:Based on the Perspective of Generalized Disappointment Aversion
In the stock marketdue to overconfidence or other subjective factors,decisions made by investors do not follow the completelyrationalhypothesis.Whether it is the 2008 financial crisis or the 2015 A-share market crash,there are traces of investor behavior such as herding effect or fire sales.At present,the research on inves-tor preference in the A-share market mainly focuses on the theoretical model level.Few literatures are based on the theoretical model of investor preference to study the downside risks of the A-share market from an empirical perspective.At the same time,existing studies often only start from the full sample,ignoring the inconsistency of downside risks in differentstockmarketperiods.For the above reasons,based on the generalized disappoint-ment aversion factor model proposed by Adam and Roméo(2018),the relationship between the downside risk and the expected return in Chinese stock market is studied.In the empirical test,the monthly stock data of all stocks in the A-share market from January 2002 to June 2019 are selected for a total of 210 months for research.With reference to the methods of Fama and French,25 investment portfolios in 4 categories including scale and book-to-market value ratio,scale and momentum ranking,scale and investment ranking,and scale and profit-ability ranking are constructed,verifying the robustness of the downside factors after controlling for the above factors.Subsequently,in view of the differences in risk premiums at different market stages,the performance of each factor in stages is also examined,and it is found that investors with generalized disappointment aversion behavior would have an impact on the risk appetite of the market.Finally,considering that the behavior of institutional investors will also affect the formation of stock market bubbles and extreme risks,the impact of institutional investors on the downside risk premium is also examined.Through empirical research,it is found that:(1)generalized disappointment aversion and stock market downside factors can explain the expected return of assets.Chinese stock market investors have typical generalized disappointment aversion behavior,and volatil-ity is less effective in explaining returnin Chinese stock markets.(2)With sub-testing,it is also found that the reason behind the excess return ofdownside factor is risk-taking;the excess return of downside risk has different characteristics in different periods of the stock market,indicating that investors havegreaterdegree of risk appetite when extreme negative returns occur in the stock marketthan other stocks market periods.During the stock market upside period,investors turn to be risk aversion.(3)Institutional investors have a higher degree of general disappointment aversion.They require a higher downside risk premium during the stock market up period,and become risk chasing during the down period of the stock market;The assets with the highest proportion of retail investors have negative downside risk premiums in all periods,and investors have shown risk chasing in all periods.
NETL
NSTL
万方数据
