Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
권호 표지
DOI QR코드

DOI QR Code

Idiosyncratic Volatility, Conditional Liquidity, and Cross-section of Stock Returns in Korea

고유변동성, 조건부 유동성, 그리고 주식수익률의 횡단면에 관한 연구

  • Yun, Sang-Yong (Department of Economics, Chosun University) ;
  • Cho, Seong-Soon (Division of Maritime Management and Economics, Korea Maritime and Ocean University) ;
  • Park, Soon-hong (School of Business, Chungnam National University)
  • 윤상용 (조선대학교 경제학과) ;
  • 조성순 (한국해양대학교 해양경영경제학부) ;
  • 박순홍 (충남대학교 경영학부)
  • Received : 2021.02.28
  • Accepted : 2021.03.25
  • Published : 2021.03.31
Download PDF
⟨ Previous Next ⟩

Abstract

Purpose - This study examines whether flight-to-liquidity (FTL) explains the dynamic liquidity risk on stock returns, and whether it has a significant influence on determinants the cross-section of stock returns. Design/methodology/approach - This study suggests a new risk factor, dynamic liquidity hedge portfolio (DLP), to reflect the dynamic impact of liquidity risk on stock returns and the Fama-MacBeth 2 stage regression analysis is employed in order to analyze the data. Findings - First, the DLP factor shows more positive and significant beta for the small or illiquidity stocks. Second, the DLP shows a different influence than SMB (size risk factor), HML (value risk factor), NMP (liquidity risk factor), FTVOL (total volatility factor) in determining the cross-section of stock returns. In addition, the DLP has a statistically significant risk premium of around 5%, which is relatively larger than other risk factors. Research implications or Originality - This study has academic value in terms of newly confirming that the DLP factor has a more significant impact on cross-sectional determination of stock returns than other risk factors by proposing a conditional liquidity factor that can explain the FTL phenomenon.

Keywords

References

  1. 고봉찬, 김진우 (2014), "저변동성 이상현상과 투자전략의 수익성 검증", 한국증권학회지, 43(3), 573-603.
  2. 김태혁, 변영태 (2011), "한국 주식시장에서 3요인 모형을 이용한 주식수익률이 고유변동성과 기대수익률 간의관계", 한국증권학회지, 40(3), 525-550.
  3. 변영태, 박종해, 김수경 (2011), "고유변동성과 기대수익률 간의 관계에 관한 연구", 산업경제연구, 24(2), 613-627.
  4. 안희준, 이형철 (2017), "기업고유 변동성과 체계적 변동성이 유동성에 미치는 효과", 재무연구, 30(1), 1-32.
  5. 엄철준, 이우백, 박래수, 장욱, 박종원 (2014), "한국 주식시장의 고유변동성 퍼즐에 대한 연구", 한국증권학회지, 43(4), 753-784.
  6. 옥영경, 안승철, 김정무 (2018), "고유변동성 이상 현상의 강건성에 관한 검토", 한국증권학회지, 47(4), 635-671.
  7. 윤상용, 구본일, 엄영호, 한재훈 (2009), "한국 주식시장에서 유동성 요인을 포함한 3요인 모형의 설명력에 관한 연구", 재무연구, 22(1), 1-44.
  8. 윤상용, 구본일, 엄영호 (2011), "기업변동성과 주식수익률의 횡단면에 관한 연구. 재무연구, 24(1), 91-131.
  9. 윤상용, 박순홍 (2014), "기업변동성프리미엄은 주식수익률을 예측하는가?", 금융공학연구, 13(2), 31-51.
  10. 장욱, 엄철준, 박종원 (2016), "차익거래 비대칭성이 고유변동성 퍼즐에 미치는 영향: 한국 주식시장", 금융공학연구, 15(1), 21-44.
  11. 장지원 (2016), "극단적 투자성과에 대한 회피 성향과 주식수익률의 횡단면", 한국증권 학회지, 45(5), 1001-1034.
  12. Abrugi, B. A. and S. Dutta (2014), "Are We Overestimating REIT Idiosyncratic Risk? Analysis of Pricing Effects and Persistence", International Review of Economics and Finance, 29, 249-259. https://doi.org/10.1016/j.iref.2013.05.019
  13. Acharya, V., Y. Amihud and T. Bharath (2013), "Liquidity Risk of Corporate Bond Returns: A conditional approach", Journal of Financial Economics, 110(2), 58-386.
  14. Amihud, Y. (2002), "Illiquidity and Stock Returns: Cross-section and Time-series Effects", Journal of Financial Markets, 5(1), 31-56. https://doi.org/10.1016/S1386-4181(01)00024-6
  15. Amihud, Y. and H. Mendelson (1986), "Asset Pricing and the Bid-ask Spread", Journal of Financial Economics, 17(2), 223-249. https://doi.org/10.1016/0304-405X(86)90065-6
  16. Ang, A., R. J. Hodrick, Y. Xing and X. Zhang (2006), "The Cross-section of Volatility and Expected Returns", Journal of Finance, 61(1), 259-299. https://doi.org/10.1111/j.1540-6261.2006.00836.x
  17. Ang, A., R. J. Hodrick, Y. Xing and X. Zhang (2009), "High Idiosyncratic Volatility and Low Returns: International and further US evidence", Journal of Financial Economics, 91(1), 1-23. https://doi.org/10.1016/j.jfineco.2007.12.005
  18. Angelidis, T. and N. Tessaromatis (2009), "Idiosyncratic Risk Matters! A Regime Switching Approach", International Review of Economics and Finance, 18, 132-141. https://doi.org/10.1016/j.iref.2007.09.003
  19. Acharya, V. and L. H. Pederson (2005), "Asset Pricing with Liquidity Risk", Journal of Financial Economics, 77(2), 375-410. https://doi.org/10.1016/j.jfineco.2004.06.007
  20. Bali, T. G., N. Cakici, X, S. Yan and Z. Zhang (2005), "Does Idiosyncratic Risk Really Matter?", Journal of Finance, 60(2), 905-929. https://doi.org/10.1111/j.1540-6261.2005.00750.x
  21. Bekaert, G. and C. R. Harvey (2000), "Foreign Speculators and Emerging Equity Markets", Journal of Finance, 55(2), 565-613. https://doi.org/10.1111/0022-1082.00220
  22. Bekaert, G., C. R. Harvey and C. Lundbald (2007), "Liquidity and Expected Returns: Lessons from Emerging Markets", Review of Financial Studies, 20(6). 1783-1831. https://doi.org/10.1093/rfs/hhm030
  23. Brennan, M. J. and A. Subramanyam (1996), "Market Microstructure and Asset Pricing: On the Compensation for Illiquidity in Stock Returns", Journal of Financial Economics, 41(3), 441-464. https://doi.org/10.1016/0304-405X(95)00870-K
  24. Brennan, M. J., T. Chordia and A. Subrahmanyam (1998), "Alternative Factor Specifications, Security Characteristics, and the Cross-section of Expected Stock Returns", Journal of Financial Economics, 49, 345-373. https://doi.org/10.1016/S0304-405X(98)00028-2
  25. Brown, D. P. and M. A. Ferreira (2016), "Idiosyncratic Volatility of Small Public Firms and Entrepreneurial Risk", Quarterly Journal of Finance, 6(1), 1-59. https://doi.org/10.12677/FIN.2016.61001
  26. Brunnermeier, M. K. and L. H. Pederson (2009), "Market Liquidity and Funding Liquidity", Review of Financial Studies, 22, 2201-2238. https://doi.org/10.1093/rfs/hhn098
  27. Chorida, T., R. Roll and A. Subrahmanyam (2000), "Commonality in Liquidity", Journal of Financial Economics, 56, 3-28. https://doi.org/10.1016/S0304-405X(99)00057-4
  28. Chorida, T., R. Roll and A. Subrahmanyam (2001), "Market Liquidity and Trading Activity", Journal of Finance (2), 501-530.
  29. Datar, V. T., N. Naik and R. Radcliffe (1998), "Liquidity and Stock Returns: An Alternative Test", Journal of Financial Markets, 1(2), 203-219. https://doi.org/10.1016/S1386-4181(97)00004-9
  30. Easley, D., S. Hvidkjaer and M. O'Hara (2002), "Is Information Risk a Determinant of Asset Returns?", Journal of Finance, 57(5), 2185-2221. https://doi.org/10.1111/1540-6261.00493
  31. Fama, E. F. and K. R. French (1993), "Common Risk Factors in the Returns on Stocks and Bonds", Journal of Financial Economics, 33(1), 3-56. https://doi.org/10.1016/0304-405X(93)90023-5
  32. Fama, E. F. and J. D. MacBeth (1973), "Risk, Return, and Equilibrium: Empirical Tests", Journal of Political Economics, 81(3), 607-636. https://doi.org/10.1086/260061
  33. Flori, F. (2000), "Liquidity Premia in the Equity Markets: An Investigation into the Characteristics of Liquidity and Trading Activity", working paper.
  34. French, K. R. and R. Roll. (1986), "Stock Return Variance: The Arrival of Information and the Reaction of Traders", Journal of Financial Economics, 17(1), 5-26. https://doi.org/10.1016/0304-405X(86)90004-8
  35. Gallmeyer, M., B. Hollifield and D. J. Seppi (2005), "Demand Discovery and Asset Pricing", working paper.
  36. Garleanu, N. and L. H. Pedersen (2007), "Liquidity and Risk Management", American Economic Review, 97(2), 193-197. https://doi.org/10.1257/aer.97.2.193
  37. Goyal, A. and P. Santa-Clara (2003), "Idiosyncratic risk matters!", Journal of Finance, 58(3), 975-1007. https://doi.org/10.1111/1540-6261.00555
  38. Gromb. D. and D. Vayanos (2002), "Equilibrium and Welfare in Markets with Financially Constrained Arbitrageurs", Journal of Financial Economics, 66(2-3), 361-407. https://doi.org/10.1016/S0304-405X(02)00228-3
  39. Han, Y., T. Hu and D. A. Lesmond (2015), "Liquidity Biases and the Pricing of Cross-sectional Idiosyncratic Volatility around the World", Journal of Financial and Quantitative Analysis, 50(6), 1269-1292. https://doi.org/10.1017/S0022109015000605
  40. Jones, C. M. (2002), "A Century of Stock Market Liquidity and Trading Costs", working paper.
  41. Longstaff, F. A. (2009), "Portfolio Claustrophobia: Asset Pricing in Markets with Illiquid Asset", American Economic Review, 99(4), 1119-1144. https://doi.org/10.1257/aer.99.4.1119
  42. Paster, L. and R. F. Stambaugh (2003), "Liquidity Risk and Expected Stock Returns", Journal of Political Economy, 111(3), 642-685. https://doi.org/10.1086/374184
  43. Spiegel, M. I. and X. Wang (2005), "Cross-sectional Variation in Stock Returns: Liquidity and Idiosyncratic Risk", working paper.
  44. Stoll, H. (2000), "Friction", Journal of Finance, 55, 1479-1514. https://doi.org/10.1111/0022-1082.00259
  45. Vayanos, D. (2004), "Flight to Quality, Flight to Liquidity, and the Pricing of Risk", working paper.
  46. Watanabe, A. and M. Watanabe (2008), "Time-varying Liquidity Risk and the Cross-section of Stock Returns", Review of Financial Studies, 21(6), 2449-2486. https://doi.org/10.1093/rfs/hhm054