Erschienen in:Macquarie University Faculty of Business & Economics Research Paper
Umfang:
1 Online-Ressource (62 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.3284886
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 29, 2019 erstellt
Beschreibung:
This paper documents a highly downward sloping security market line (SML) in China, which is more puzzling than the typical “flattened” SML in the US, and does not reconcile with existing theories of low-beta anomaly. We show that investor overconfidence offers some promises in resolving the puzzle in China: In the time-series dimension, the slope of the SML becomes more “inverted” when investors get more overconfident. This dynamic overconfidence effect is intensified with biased self-attribution. As a general symptom of overconfidence in the cross section, high-beta stocks are also the mostly heavily traded. After accounting for trading volume, there is no longer the low-beta anomaly at both the firm and portfolio levels. Mutual fund evidence reinforces the view that institutional investors actively exploit the portfolio implications of a downward sloping SML by shying away from high-beta stocks and betting on low-beta stocks for superior performance