The Influence Of Skewness Preference On Special Treatment Announcement Of Chinese Stock Market

The effect of special treatment(hereinafter referred to as ST)announcement has been one of the hot spots for Chinese scholars.The special treatment refers to restrictions on its stock trading activities of China's listed companies because of its financial abnormalities or other abnormal situations.Chinese scholars only studied whether the market response to the ST announcement,or explore variables from the internal perspective or the market perspective.And there is no researchers think of the impact of investors' emotion on the effect of ST announcement.Skewness is an important proxy variable for the psychological activity of investors.And preference for skewness is a psychological phenomenon that people tends to pursuit securities with skewed return than securities with a normal return.Chinese scholars mainly studied whether the skewness is priced,or whether total skewness or idiosyncratic skewness been priced.There is no researcher studied the impact of investors' skewness preference on the ST announcement.So this article attempts to explain the special treatment announcement event from the perspective of investor's skewness preference.Because of the inability to obtain a single investor's investment option,and it is difficult to measure the degree of skewness preference of individual investors,so this paper chooses the skewness of stocks which can reflect the degree of all investors' preferences.In the empirical analysis,this paper uses the event research method proposed by Fama(1965)to study the effect of ST announcement and finally uses robust regression to analyze the relationship between skewness and cumulative abnormal returns.Since the existing literature has proved that there is a significant influence between the market skewness and the stock price.Therefore,when calculating the expected return of stock,this paper first compares the market models in different moment of the ST stock returns.The results show that in contrast to previous conclusions,the impact of market skewness on the earnings of ST stocks is not significant.Therefore,this paper chooses the traditional market model to calculate theexpected yield of stock.This paper selects all the companies in its first time special treated in the A-share stock market during 1999 to 2016,and the investor's skewness preference is expressed by the skewness of the stock excess yield.This paper manages to analyze the impact of skewness preference on the effect of the special treatment announcement by using robust regression.The empirical results show that the idiosyncratic skewness has a significant negative effect on the cumulative abnormal rate of return before the special treatment announcement.Its impact is not significant on the cumulative yield of two trading days after the ST announcement.But the idiosyncratic skewness has a significant positive effect on the 2-week cumulative abnormal rate of return after the special treatment announcement.This relationship stays unchanged when using different normal yield measurement model.And among other variables,the influence of control variables such as scale factor and market value ratio is significant in certain circumstances.