Turnover Premium And Arbitrage Risk

Turnover is standardized stock trading volume index,which can measure the degree of activity of stock trading.But we still don't know much about the nature of turnover.As we all know,when investors have the demand of hedging,liquidity demand,portfolio construction and so on,the occurrence of trading activities is reasonable.But when investors have psychological biases,such as overconfidence,limited attention and heterogeneous beliefs,trading activities may be behavior-driven.However,the theory of capital asset pricing based on risk,whether static or dynamic,does not explain much about the nature and impact of turnover rate.As a relatively easy to obtain and stable market index,the relationship between turnover rate and stock returns has been widely concerned by scholars at home and abroad.A large number of studies have pointed out that there is a significant negative relationship between the turnover rate and the future return rate of stocks,but there is still much discussion about the nature of the negative premium between the two.More and more studies have found that the liquidity premium risk compensation hypothesis can not fully explain the turnover rate.Negative relationship between rate and future yield.Therefore,based on the previous literature,this paper firstly proves that there is a significant negative relationship between the stock turnover rate and the future earnings of the stock through one-dimensional portfolio analysis and Fama-Macbeth cross-sectional regression.The negative relationship has not changed even after controlling the liquidity factor,which indicates that the negative relationship between the stock turnover rate and the future yield of the stock is not completely affected by liquidity,and the risk compensation with liquidity premium The hypothesis to explain the negative correlation between stock turnover and future earnings of stocks is not comprehensive.We build a portfolio to verify the sustainability of the turnover rate premium.Through an analysis of the turnover rate holding period,we find that in China's A-share market,the turnover rate premium can last significantly for 12 months.Cross-sectional regression of Fama-Macbeth also confirmed that after adding the volatility of the traits of measuring the risk of operating stocks and the risk of noise traders,the regression coefficient of the turnover rate was significantly reduced,and the arbitrage cost index was significant,indicating the Chinese market.The turnover rate premium can be partially explained by the arbitrage risk.We expand and extend the research on the meaning of turnover rate.We study the turnover rate of stocks of different states and types by grouping,which confirms the performance of turnover rate premium in small-cap stocks than the market value.The performance in stocks is more pronounced and significant,and is more pronounced in stocks with higher book-to-market ratios than stocks with lower book-to-market ratios.Under the condition of controlling other influencing factors,we found that the heterogeneous belief explained the turnover rate to a certain extent,but the degree of interpretation was not high.The turnover rate explains the heterogeneous belief to a certain extent,and the degree of interpretation is higher.It can be roughly stated that the turnover rate includes heterogeneous beliefs,but the heterogeneous beliefs do not include the turnover rate,and the meaning of the turnover rate is greater.In addition to the liquidity explored in the previous article,there are many other heterogeneous beliefs that we have not yet discovered.The mysterious and complex meaning of the turnover rate is still waiting for us to explore.