The Study Of Low-Price-Stock Effect In China's Stock Market

With the continuous development and modification of Chinese capital market,more and more investors select stock as one tool for their asset allocation.The regulator also continuously emphasizes the importance of the healthy development of stock market.The economic globalization enhances the co-movement between Chinese stock market and other economic entity.In this process,all kinds of financial anomalies in stock market not only provide more space to get supernormal profit for investors,but also provide the power to study inspiration and develop finance theory for domestic and foreign scholars.Numerous anomalies in Chinese stock market have got extensive study and attention,except the low-price-stock effect.On the contrary,the low-price-stock effect has been tested in American stock market and regained the research enthusiasm of academic circle in recent years.Price is not any more the neutral concept of market view.The investment value and regulatory logic contained in it deserved us to pay more attention to.This paper taking all the data in 2000-2017 of share A listed companies(except financial stocks,public utility stocks and ST stocks)as sample,with year as grouping frequency,uses ways such as single variable grouping,two variables grouping,two-beta model,panel regression,Fama-Macth regression to check the existence,robustness and inherent factors of low-price-stock effect.Empirical study finds that there indeed has low-price-stock effect in Chinese stock market.With the stock price increasing from low to high,the yield of portfolio is on the rise.The difference in yield between the lowest price portfolio and the highest price portfolio is significant positive.The low-price-stock effect is easily influenced by market trend.It will be enhanced in bull market while weakened even be opposite in bear market.To avoid the influence of individual share characteristics to the existence of low-price-stock effect,this paper uses SIZE,PB,ILLIQ,IVOL,DRISK,MOM,MAX,TSKEW and COSKEW as control variable to study.According to statistical result,we find that the low-price-stock effect always exists no matter how these variables change.But the strength of effect will be influenced by some variables.So the existence of the low-price-stock effect is robust.Panel regression result shows that under the control of other variables,stock return has a significant negative correlation with nominal share price,which is low-price-stock effect.The intercept term alpha got from traditional CAPM and Fama&French three-factor-model regression has significant tendency with the changing of nominal stock price.The explanatory power of traditional model is limited.The cash-flow and discount-rate beta got from two-beta model show significant tendency with the changing of stock price.It indicates that low-price-stock effect can be priced and explained by two-beta model.Low-priced stock has high cash-flow risk and low discount-rate risk and the risk price of cash-flow beta is significant positive.It indicates that the yield of low-priced stock is more sensitive to cash-flow risk.This paper mainly considers two factors:analyst concern and price information level,to explain that low-priced stock is highly sensitive to cash-flow risk.By the test,we find that limit analyst concern and price information influence the efficiency of information disclosure and securities pricing,resulting in value deviation of low-priced stock.For the orderly and healthy development of stock market,the regulators should(1)fully realize the importance of security analyst industry to the healthy operation of capital market,enhance the examination of quality and compliance of analyst research and relevant capital proposal issue,avoid the actions such as insider trading and market rigging.(2)improve the information disclosure requirement of listed companies,enhance the transparency of financial information,increase the price information content and the operational efficiency of financial market.(3)develop security margin trading to improve market efficiency.