| The traditional financial pricing theory holds that the risk and return of assets show a significant positivecorrelation relationship.Many empirical tests from the market demonstrate that the relationship between risk and return of assets is not completely in line with Capital Asset Pricing Model.Instead,the greater the risk,the smaller the return is When measures the risk level of stocks with Beta,There exists the Beta Anomaly,presenting that low beta stocks With good performance in the future and high beta stocks with poor performance.Beta Anomaly exists not only in developed asset markets,but also in emerging markets represented by China's stock market.In existing related research,in base of the existence test of the anomaly,scholars explored the cause of it from different perspectives,involving compensationof risk factors,defects in market micro structure,as well as investor behaviors and emotions.The results were quite mixed but the opinions were not consistent.Based on the existing literature,this paper makes a comprehensive and in-depth analysis of the Beta Anomaly in China's stock market.Firstly,using the low-frequency daily data to construct Betas,the existence and robustness of the Beta Anomaly are tested.The mispricing of Beta in the stock cross section is verified.Then Beta is further decomposed in the high-frequency data according to the price jump and continuous variation of individual stocks and the market,by which the jump Beta and continuous Beta are constructed respectively.Jump Beta characterizes the sensitivity of individual stocks to market price jumps,and continuous Beta characterizes the sensitivity of individual stocks to continuous changes in market prices.It is tested whether the high frequency jump Beta and the continuous Beta reflect the Beta Anomaly.The empirical results show that the jump Beta shows a significant Beta Anomaly.Although the continuous Beta also shows a certain anomaly,after controlling the difference of the jump Beta,the pricing anomaly of the continuous Beta is no longer significant.The Jump Beta Anomaly is still significant after controlling the difference of continuous Beta.The research results show that the Beta Anomaly in China's stock market is mainly reflected in the Jump Beta Anomaly.When discussing the causes of Jump Beta Anomaly,this paper carries out from the perspective of compensation for risk factors and behavioral finance.With regard to the compensation of risk factors,I constructed a list of risk factors referring to the construction method of pricing factors in the Fama-French model.These risk factors reflect the pricing role of indicators such as reversal factors,turnover rate,liquid and volatility in China,s stock market.The empirical results show that although the difference between the high and low Beta portfolios can be explained to some extent by the above pricing factors,the excess returns are still significant after using the factor model risk adjustment,indicating that the Jump Beta Anomaly cannot be fully explained from the perspective of compensation for risk factors.After that,this paper focuses on the cause analysis from the perspective of behavioral finance,mainly examining the influence of market investors' irrational preferences and trading behavior on Jump Beta AnomalyThe results of this paper show that the Jump Beta is indeed closely related to investor irrationality.When portraying the irrational psychology of investors,this paper constructs the TK indicator value based on the prospect theory.In the specific construction process,several typical characteristics of irrational investors are considered,including the characteristics of overestimation of small probability events caused by representative heuristic behavioral deviations,excessive aversion losses,and reference point dependence.Irrational investors have an excessive preference for stocks with high TK values,and stocks with low TK values are excessively disgusted.Such trades under cognitive bias can cause asset prices to deviate from its fundamental value.In this paper,the correlation test,variable-controlling method by bivariate group and Fama-MacBeth regression method are used to investigate the explanatory power of TK values on Jump Beta Anomaly.I verified that investor irrationality is the main cause of JumpBeta Anomaly.In addition,in order to further demonstrate the rationality of the results,this paper also divides the sample stocks according to the proportion of institutional shareholding,and separately examines Jump Beta Anomaly in different subsamples.The empirical results show that in the subsample with a higher proportion of irrational and less professional individual investors,the Jump Beta Anomaly is more prominent.While in the subsample with a relatively high proportion of institutional shareholdings,the Jump Beta Anomaly is relatively weak.This result also supports the irrationality of investors to lead to the Jump Beta AnomalyThe reason why this paper chooses to further decompose Beta into jump Beta and continuous Beta with high frequency data,and deeply exploreJump Beta Anomaly on high frequency data,mainly because:(l)High-frequency data contains more information.In theory,information in the financial market will continuously affect the dynamic process of asset prices.Therefore,the higher the acquisition frequency,the less information loss.When the data collection frequency is gradually increased,the asset price information contained in the data is gradually closer to the theoretically continuous time asset pricing model;(2)The jump period and continuous periodof assets' price have significant differences in risk assessment,risk management methods and trial of investors' risk tolerance,and these differences are likely to cause the relationship between asset risk and return to occur during the jumping period.Distorted,exhibiting different risk characteristics than continuous periods of change.In view of the above considerations,this paper uses the high frequency data to construct the jump Beta and the continuous Beta,respectively,to examine the Beta Anomaly.The reason why this paper analyzes the causes of Beta Anomaly from the perspective of investors' irrationality is mainly because:(1)There are many retail investors with poor professionalism and high irrationality in the Chinese stock market,and transactions are frequent,which have an important impact on the formation of asset market prices and the process thattrading prices deviate from fundamental prices.(2)If the Beta Anomaly is mainly characterized by Jump Beta Anomaly,the price jump means that the investor has a high return or loss in a very short time.Therefore,when investors are not completely rational,there will be different attitudes and trading behaviors when facing the risks involved in price jumps.These factors will eause the relationship between the risk and the return of the price in jump period to be different from that in the continuous period.The research in this paper helps investors to understand the risks involved in price jumps in a concrete way,and provides empirical support for investors to constrain and regulate irrational investment behavior.In academic research,it further demonstrates the limitations of traditional financial theory in specific market applications.The decomposition of Beta in high-frequency data further reveals that the pricing anomaly of Jump Beta is the main cause of Beta vision in the market.In this paper,the research on Beta Anomaly is extended to high-frequency data,which provides new ideas for analyzing other pricinganomaly,and also enriches the relevant research on the use of investor irrationality to explain market anomalies in the framework of prospect theoryCompared with the existing researches,this paper has the following innovations and contributions.Fir st,the Beta of individual stocks is further decomposed on the high-frequency data,and the performance of Beta Anomaly is specific to the pricing anomaly of Jump Beta,which is more conducive to the analysis of the causes of Beta Anomaly.In the existing research,after testing the low-frequency Beta Anomaly,the analysis and discussion of the cause of the Beta Anomaly are directly started.However,after verifying the existence of the Beta Anomaly in the low-frequency dimension,this paper further uses high-frequency data to decompose Beta into Jump Beta and Continuous Beta,and explores whether Beta Anomaly mainly appears as Jump Beta Anomaly or Continuous Beta Anomaly.Based on thehigh frequency data,this paper constructs the intraday jump Beta,continuous Beta and overnight Beta of individual stocks,and examines whether there is ananomaly of the risk premium of each Beta.It is found that when the difference of continuous Beta is controlled,the Jump Beta Anomaly is significant;when the difference of the jump Beta is controlled,the portfolios constructed by continuous Beta no longer has significant excess returns.This shows that the Beta Anomaly in China's stock market is mainly appearingas the Jump Beta Anomaly,which further confirms the important role of studying the risk of price jump under high frequency data.Second,the innovation of research perspective.This paper turns the perspective of Beta Anomaly analysis from the overall stock Beta to the main investigation of the Jump Beta Anomaly.Since the price jump means that the price changes in a very short time is large,the risk management is difficult and the investors pay attention to it.In particular,the jump in prices means that investors will have high returns in a very short period of time,which is extremely attractive to irrational investors.When the price jumpsdown,the irrational investors will have excessive panic,so the price jump will cause the investor's risk attitude to change,and further the relationship between the risk and the return of the price jump period is different from the continuous price fluctuation period.Therefore,Jump Beta Anomaly provides better support to explain anomaly in the perspective of investors'irrationality.Thirdly,the cause analysis of the Jump Beta Anomaly is placed under the framework of prospect theory,which makes the empirical research process more standardized.This paper constructs the TK indicator based on the prospect theory when constructing and characterizing the irrational preference of investors for certain stocks.In the specific construction process,several typical characteristics of irrational investors are also examined,including the characteristics of overestimation of small probability events,excessive aversion losses,reference point dependence,etc.caused by representative heuristic behavioral deviations.The above irrational behaviors are reflected in the specific process of indicators,which makes this paper have a more standardized theoretical basis when using investors' irrational behavior to explain Jump Beta Anomaly. |
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